Preamble

The House met at half-past Two o'clock

The Clerk at the Table informed the House of the unavoidable absence through illness of Mr. SPEAKER from this day's Sitting:—

Whereupon Dr. HORACE KING, The CHAIRMAN OF WAYS AND MEANS, proceeded to the Table and, after Prayers, took the Chair as DEPUTY-SPEAKER, pursuant to the Standing Order.

PRIVATE BUSINESS

WELSH SHIPPING AGENCY BILL [Lords]

As amended, to he considered upon Tuesday next.

Oral Answers to Questions — LOCAL GOVERNMENT

Rateable Values (Assessment)

Mr. Bessell: asked the Minister of Housing and Local Government if he will take steps to issue an instruction to local authorities that physical inspection of hereditanients shall be required before rateable values are determined.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): No, Sir. Local authorities are not responsible for assessing property for rates.

Mr. Bessell: I thank the hon. Gentleman for that reply. Would he consider issuing a directive to superintendent valuers instructing them to give information as to how valuation risks were arrived at through local authorities or ratepayers' associations in those areas where large numbers of successful appeals indicate a considerable measure of error?

Mr. MacColl: Responsibility for the control or valuation belongs to my right hon. Friend the Chancellor of the Exchequer.

Birmingham (Green Belt)

Mr. Dance: asked the Minister of Housing and Local Government when he expects to announce his decision on the green belt round Birmingham.

The Minister of Housing and Local Government (Mr. Richard Crossman): This must wait until the current West Midland's regional study has been completed.

Mr. Dance: Does the right hon. Gentleman realise that, pending a decision, there is a complete freezing of land for infilling in that part of the country? Until a decision is made, most local councils are loath to give planning permission for infilling, which means that many homes which could be built are not being built.

Mr. Crossman: I realise the consequences here but I have looked into the matter and I am quite satisfied with the present arrangements whereby planning authorities are using their powers in the green belt. I do not wish to disturb the position. We shall simply have to wait until the study is completed. I am making sure that it is got on with as quickly as possible.

Local Government Finance

Mr. Channon: asked the Minister of Housing and Local Government what reforms he proposes in the rating system.

Dame Irene Ward: asked the Minister of Housing and Local Government if he will take action towards relieving ratepayers of part of their rates burden and transferring the cost to the Treasury.

Mr. Gower: asked the Minister of Housing and Local Government what steps he will take to reduce the burden of rates.

Sir Rolf Dudley Williams: asked the Minister of Housing and Local Government what steps he porposes to take to lessen the burden of rates.

Mr. Crossman: As I stated in reply to the hon. and learned Member for Ruislip-Northwood (Mr. Crowder) on 13th November, I would ask hon. Members to await the outcome of the Government's examination of the whole question of local government finance.

Mr. Channon: Can the right hon. Gentleman say when this review is likely to be completed? Will he recognise that


there is a very severe problem which greatly varies from area to area and that there are people in certain areas who are hard hit while others in areas where there is a good deal of industry are not hard hit? As many thousands of ratepayers are deeply affected, will the right hon. Gentleman give this matter his urgent attention?

Mr. Crossman: Of course I appreciate the desire for speed which is shown on both sides of the House. I did not observe the same desire for speed when we in Opposition started pressing this matter in 1959, and year after year following that. All I will say now is that this is a very big job. We have been in office for four weeks. We are seriously undertaking it and we mean to do something serious about it, but we have to have time to consider an issue as big as this.

Mr. Gower: As the right hon. Gentleman and his colleagues attacked the Conservative Government about rates, did they not then prepare an alternative plan, especially as their criticisms at that time Committee is already with the printers.

Mr. Crossman: The question of how we are to reform local government finance. not only rates, but the whole system of finance, is linked to the question of the reform of local government as a whole. Certainly we came into office with ideas, but at least we have the sense to ascertain the facts. For instance, I have only just received the Allen Report and I presume that the hon. Gentleman would like that Report to be studied before we finally made up our minds.

Mr. George Jeger: In his survey of the rating system, will my right hon. Friend include the subject of drainage rates in rural and semi-rural areas which rather unfairly hit people in areas which are being developed?

Mr. Crossman: I will take account of my hon. Friend's suggestion.

Mr. Corfield: Will the right hon. Gentleman bear in mind, when he says that we have to find the facts, that in 1959 it was impossible to appreciate what would be the effect of revaluation and bringing all the various hereditaments up to the same current value? Would he not agree that what he said in 1959 has nothing to do with the problem now?

Mr. Crossman: I am grateful to the hon. Gentleman for giving the reasons why we have to move rather more slowly on these things than some of his hon. Friends want. There are a number of factors to be considered, such as revaluation, and others coming out in the Allen Report. I have also to consult the local authority associations. There is a mass of work to be done and we have been just four weeks in power.

Mr. Shinwell: As a matter of interest and information, can my right hon. Friend say which party brought in the rating and valuation legislation which led to an increased burden on the rates?

Mr. Wingfield Digby: asked the Minister of Housing and Local Government whether he will call for interim reports from the two bodies inquiring into the rates and rating system.

Mr. Crossman: The Government are examining the system of local government finance as a whole and I do not think that it would be practicable to reach and publish interim conclusions about rating. The Report of the Allen Committee is already with the printers.

Mr. Digby: Does not the right hon. Gentleman realise that it will take a very long time to print this Report? Could not the House be given the main findings of the Allen Report and could not we have some indication as to how this other inquiry is going along?

Mr. Crossman: I have been trying to trace the other inquiry which the hon. Member mentioned but I cannot find one. As regards the Allen Committee, this inquiry was a major job and I believe I owe it to the Committee and the House to let the House judge the Report as a whole and study it as a whole. To publish a four-page summary would be an insult to the people who have done this basic research on a very important problem.

A.2 Trunk Road (Gypsies)

Mr. Dodds: asked the Minister of Housing and Local Government if he will make a statement on the prospects for those gypsies and other travellers evicted from the temporary camp at Lodge Lane, Cobham, Kent, in September to the vicinity of the A.2 trunk road, and for


those who have joined them on the completion of seasonal farm work; how many men, women and children are involved; what information he has on the action taken to provide a water supply and sanitary arrangements; and what action he is taking in the light of the several official undertakings given upon the closing of the Cobham camp.

Mr. Murray: asked the Minister of Housing and Local Government what progress is being made in the provision of specially prepared sites for those gypsies and other travellers temporarily accommodated on the site at Lodge Lane, Cobham, Kent.

Mr. Crossman: The facts, if I have established them correctly, are as follows: 12 caravans were originally evicted from Lodge Lane site and have now been joined by others. The numbers vary, but the most recent estimate was that 38 families were parked beside the trunk road. This is not an authorised site and services cannot be laid on. Water is, however being carted daily to the caravans by the Strood Rural District Council. No official undertakings were given upon the closing of the Lodge Lane site, and these people were evicted by the district council in the knowledge that no alternative accommodation was being provided. So much for the facts.
I now turn to the provisions that can be made for these unfortunate people. Sites and services are matters for the local authorities. I have no power to provide them myself or to require local authorities to do so. Several sites for itinerants are being provided, I gather, by local authorities in Kent, and I have been given to understand that the claims of the people evicted from Lodge Lane will be taken into account when these sites are ready.
I know how much the hon. Gentlemen have the cause of these people at heart and I am re-examining the whole problem with a view to hastening the provision of an adequate number of sites.

Mr. Dodds: Is my right hon. Friend aware that he has not got the facts? Is he not aware that this temporary site at Cobham was started on the understanding that it would give the authorities time to find other sites? Is he aware

that while there are only 12 caravans at the moment, there were 50 on this site and that they will be coming back from the farms? Is it not disgraceful that not only men but women and children should be denied the elementary necessities? If children are to have equal opportunities, will my right hon. Friend consider having another look at this matter?

Mr. Crossman: I do not think that my hon. Friend listened to what I said. I said that I was now looking at this matter to see whether we would have to have more legislation in order to find ways of dealing with the gypsy problem. I shall look at this afresh and if my hon. Friend will put down another Question in a few weeks, I shall be prepared to give him a further Answer.

Mr. Murray: Is my right hon. Friend aware that water is not being supplied every day by Strood Rural District Council and that the council is providing water for 12 caravans when there are nearer 40? Is he further aware that disturbances are breaking out about the supply of this water? In the circumstances, will he call an emergency conference of all the authorities concerned so as to be able to do something about this problem?

Mr. Crossman: I do not myself think that there is much good in calling emergency conferences. Within the existing law I have very limited powers to require local authorities to do anything. We have either to leave things as they are in their very unsatisfactory state, or have a change and new proposals. I am prepared to think of the second.

Mr. Temple: As this is a national problem, will the right hon. Gentleman consult his right hon. and learned Friend the Home Secretary and ask him to consult police authorities, who have very few powers in this connection?

Mr. Crossman: I am grateful to the hon. Gentleman, because that is exactly what we have to remember. This is not just a local problem, nor even a problem with which one or two hon. Members have identified themselves. It is a genuine national, though small, problem which has police aspects. We shall look


at it very thoroughly before we recommend any changes.

Mr. Dodds: On a point of order. I give notice that I shall raise this matter on the Adjournment.

Footpaths (Definitive Maps)

Mr. Carol Johnson: asked the Minister of Housing and Local Government when he expects publication of all the county definitive footpath maps provided for under the National Parks and Access to the Countryside Act, 1949, to be completed.

Mr. MacColl: My right hon. Friend cannot say when these maps will all be completed. The rate of progress depends largely on the objections raised and the number of council staff available for the work. Over three-quarters of the county councils now have definitive maps for the whole or part of their areas.

Mr. Johnson: As this process has already taken three times as long as the period envisaged in the Act, will my hon. Friend's right hon. Friend use his influence and powers to get this completed as soon as possible?

Mr. MacColl: I recognise my hon. Friend's particular interest in this matter. I would welcome any advice and help which he could give us about it. But, as at present advised, my right hon. Friend thinks it better not to overload quarter sessions with many appeals and have badly prepared plans before the final decisions are reached.

Streets (Names and Numbers)

Mr. Shepherd: asked the Minister of Housing and Local Government if he is aware of the time wasted and accidents caused through inadequate street naming and numbering; and if he will introduce legislation designed to ensure adequate street naming and numbering throughout the country.

Mr. MacColl: Local authorities have long-standing powers to ensure that street names and numbers are clearly marked. These powers might be improved when opportunity allows but my right hon. Friend thinks that they are adequate meanwhile. The importance of using them to the full was emphasised in a circular from the Ministry of Transport early last year.

Mr. Shepherd: Does not the hon. Gentleman realise that, whatever the powers, the performance is wholly inadequate? Could not this very simple reform have a little precedence over some of the less desirable things which the Government are proposing, like steel nationalisation?

Mr. MacColl: The hon. Gentleman has answered his own supplementary question, because the gap is not mainly in the powers; it is mainly in the execution. My right hon. Friend is very anxious to see an improvement in that respect and hopes very much that local authorities will use their powers more effectively than they are doing.

Sir A. V. Harvey: Is the hon. Gentleman aware that this is the second time this afternoon that we have been told that local authorities have the powers but that they do not appear to be using them? Will he get all local authorities, where necessary, to exercise their powers?

Mr. MacColl: It may be that the enthusiasm of local authorities has been somewhat dissipated during the past 13 years. My right hon. Friend is very anxious that local authorities should be aware that he will encourage them in showing initiative in using their powers.

Mr. Corfield: Will the hon. Gentleman bear in mind that, despite the desirability of this, sudden changes cause considerable inconvenience to householders? Will he ask local authorities to give reasonable warning and not demand these changes to be made with the absolute minimum of delay, which can cause a great deal of inconvenience?

Mr. MacColl: As I think the hon. Member for Cheadle (Mr. Shepherd) suggested, a great deal of inconvenience is caused by bad marking of streets and some risk by people stopping in cars to look to see where they are. It is important that this matter should be brought up to date.

Recreation (School Facilities)

Mr. Shepherd: asked the Minister of Housing and Local Government what response he has had to the joint circular by his Department and the Education and Science Department relating to the outside use of school facilities for recreation.

Mr. Crossman: There has not been much time for local authorities to negotiate agreements; the joint circular to which the hon. Member refers went out only at the end of August.

Mr. Shepherd: Will the right hon. Gentleman bear in mind that this circular by itself is not likely to produce very effective results? Will he consider the possibility of some financial inducement and the importance of designing new schools so that they are capable of dual use?

Mr. Crossman: That is an extremely good point. We can do a lot in the case of new schools. In the case of old schools, we can hope to expect something from the circular, but not too much as far as indoor facilities are concerned; it is much more difficult to have double use of playing fields.

Location of Offices Bureau

Mr. Channon: asked the Minister of Housing and Local Government what action he is taking to speed up the work of the Location of Offices Bureau.

Mr. Crossman: The work of L.O.B. in helping firms to move out of London has made a very good start, and the measures recently announced for the control of office building will speed up this movement.

Mr. Channon: Everyone would agree that the Location of Offices Bureau has made a very good start, but would not the Minister agree that it is essential to get offices from the centre of London to outlying areas? Therefore, in the long term, the Government's total ban on the London Metropolitan region, which stretches a very long way, may be damaging. Will the right hon. Gentleman look at this matter again, because the Bureau was encouraging people to move out to areas still in the London Metropolitan region?

Mr. Crossman: The statement made a distinction between the inner area—the Greater London Council area—and the rest of the Metropolitan area. In the inner area the ban on new buildings was to be absolute. It was not to be nearly as absolute in the outer area—only in the cases where planning permission had not been obtained. We want this. We want in the end to relieve the pressure of office

building on the whole south-east area. We realise the need in some new towns and even in Southend. It is a highly desirable thing to get offices moved as far as that because it relieves the commuter problem of London.

Mr. Boyd-Carpenter: Will the right hon. Gentleman reflect that what he calls the inner area has been defined by his right hon. Friend as covering the whole of the Greater London Council area? That includes areas on the perimeter of London to which it would be useful to get offices to move from the centre. Therefore, will the right hon. Gentleman have another look at the absolute ban on the whole of the Greater London Council area?

Mr. Crossman: I made it perfectly clear that the absolute ban will stay for a certain time—until we find it possible to lift it. My emphasis is on moving offices further than that. It is true that if we can get them out to the new towns and Southend, it will be very much better than getting them out to Croydon.

Mr. Boyd-Carpenter: Will the right hon. Gentleman reflect that there are certain offices which, if they are to move at all from the centre, can, for practical reasons, move only to the outer London periphery and that the application of the total ban to this very large area is likely to he self-defeating?

Allen Committee (Report)

Mr. Dudley Smith: asked the Minister of Housing and Local Government, when he expects to receive the report of the Allen Committee of Inquiry into Rating; and whether he will publish it.

Mr. Crossman: As I stated in reply to the hon. Member for Dorset, North (Sir Richard Glyn) on 16th November, the Report has now been presented and will be published as soon as possible.

Mr. Smith: But as the Allen Report is bound to reveal cases of hardship, would the right hon. Gentleman make a start on solving this problem by transferring more of the cost of education to the national Exchequer; or does he stand by his reported statement at the weekend that there is no immediate possibility of solving this problem?

Mr. Crossman: That does not seem to be very much to do with the Question.

Mr. Ridsdale: Could the Minister do something about this as soon as possible? Is he aware that many elderly people are most anxiously awaiting this Report, which it has taken over two years to produce? Is it a fact that he has appointed another Committee to smear over the conclusions of the Allen Committee?

Mr. Crossman: I had the impression from what the hon. Gentleman said that he feels that everything rushes to fruition under a new Labour Government, and I am very grateful to him for that feeling. On the question of the other Committee, I know of no other Committee. We shall publish the Allen Report as soon as we can. It is a very bulky Report. I staggered under it last weekend when I took it down to read it. It has a hundred statistical tables in its appendix and I reckon that it will take at least 10 weeks to publish.

Whitstable (Survey)

Mr. Russell Johnston: asked the Minister of Housing and Local Government what study he has made of the survey of Whitstable, a copy of which has been sent to him; and, in view of the need to revise the rating system, if he will initiate similar surveys in other parts of the country.

Mr. Crossman: I have seen the report and it is being considered as part of the Government's examination of the whole system of local government finance. I do not consider further surveys to be necessary for this purpose.

Mr. Johnston: Is the right hon. Gentleman aware that his right hon. Friend the Prime Minister during the election said some favourable things about levying tax on vacant sites and vacant properties'? Would he consider acting now to levy a tax on vacant properties in the belief that this would encourage their use?

Mr. Crossman: No, I would not. I explained in answer to a previous Question that we are now considering the whole question of local government finance. The possibility of taxing site values or empty sites must be considered as part of that review. This report on Whitstable was very interesting and gave a specific study of that specific

aspect. I think that this particular solution is one which has been studied enough, and all one has to do is to decide for or against it.

Water Division (Administration)

Mr. Temple: asked the Minister of Housing and Local Government whether all the functions of the Water Division of his Department as constituted in the last Parliament are to be administered by his Department as now constituted, having regard both to the position in England and in Wales; and whether he will make a statement.

Mr. MacColl: As regards Wales I would refer the hon. Member to the statement made by my right hon. Friend the Prime Minister on 19th November. He will make a statement in due course about the responsibilities of the Minister of Land and Natural Resources which will relate to water among other matters.

Mr. Temple: Is the hon. Gentleman aware that he has not answered my Question with regard to England at all? Is he aware that his right hon. Friend the Prime Minister said that his right hon. Friend the Secretary of State for Wales would take over all the responsibilities of that Department in Wales, and does he not agree that the river authority boundaries transcend national boundaries between England and Wales? Would it not be a disaster if the functions were divided between two senior Ministers?

Mr. MacColl: I agree with the hon. Gentleman that it would be a disaster if any quick decision were made about the boundaries in these matters. Therefore, it is important to consider them. That is why my right hon. Friend is taking some time in considering his statement.

Water Rates (Payment)

Mr. Dean: asked the Minister of Housing and Local Government how many of the total number of water undertakings have arrangements for the payment of water rates at council offices; and how many water undertakings are proposing to withdraw such facilities.

Mr. MacColl: I regret that this information is not available.

Mr. Dean: Would the Minister agree that it is highly desirable for people,


particularly for old people who usually pay their rates in cash, that these facilities should continue to be available?

Mr. MacColl: It is really a matter for the local undertaking to make its own arrangements, and I think that it depends on local circumstances as to what is best and most convenient for the people.

Oral Answers to Questions — HOUSING

Wythall

Mr. Dance: asked the Minister of Housing and Local Government when he expects to announce his decision on the proposed development at Wythall by the Birmingham Corporation, which was the subject of a public inquiry on 20th May.

Mr. Crossman: I expect to announce my decision shortly.

Mr. Dance: What does the right hon. Gentleman mean by "shortly"? We have been hanging around for this decision for a very long time.

Mr. Crossman: I shall be giving my decision within a week or two.

Council Houses (Cost)

Sir H. Butcher: asked the Minister of Housing and Local Government what calculation he has made of the increase in cost of the average council house as a result of the 15 per cent. import duties imposed on timber and other imported building materials.

Mr. Chataway: asked the Minister of Housing and Local Government what effect on council house prices is expected from the 15 per cent. import surcharge on slates and other building materials.

Mr. Boyd-Carpenter: asked the Minister of Housing and Local Government what is his estimate of the increase in the cost of the average house resulting from the imposition of the 15 per cent. surcharge on imported plywood and planed softwood.

Mr. Fisher: asked the Minister of Housing and Local Government how much will be added to the cost of an average 3-bedroom house as a result of the 15 per cent. Import surcharge.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish): I have seen estimates varying from £20 to £50 per house, depending on the method of construction and materials used. The increase in cost will almost all be attributable to timber, and will depend on how much of the timber used has been imported in a planed or manufactured state. My right hon. Friend estimates that the rise in cost of the average two storey, three-bedroom council house will be less than 1 per cent. of the total cost of building it.

Sir H. Butcher: Can the hon. Gentleman say whether these factors were taken into consideration before this ridiculous 15 per cent. impost was imposed?

Mr. Mellish: Any question about the 15 per cent. import surcharge must be directed to my right hon. Friend the Chancellor of the Exchequer and not to my Department.

Mr. Boyd-Carpenter: As a great deal of this material has in any event to be imported, what justification, from the point of view of the balance of payments or otherwise, was there for imposing the impost?

Mr. Mellish: The right hon. Gentleman should get this into proportion. We have carefully reviewed the question of the amount of timber being used in house building and I understand that the extra cost on a £2,300 house would be approximately £30, although 25 per cent. of the timber is what is called imported rough timber. It would be quite impossible, with the amount of timber coming into the country, to say how much is used for housing when it arrives in its rough state.

Mr. Fisher: As my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has said, and the hon. Gentleman has acknowledged, that this surcharge will not reduce imports, will have no effect on the balance of payments and will only result in increasing the cost of housing—which is not what the party opposite promised at the election—will the hon. Gentleman consider exempting from the surcharge materials which must be imported anyway?

Mr. Mellish: The increased import duties were imposed because my right hon. Friend the Chancellor of the Exchequer found this country and its accounts in such a mess after the Conservative administration. We do not believe that the surcharge will adversely affect the number of houses that will be built.

Mr. Manuel: Is my hon. Friend aware that certain timber merchants increased the price of timber right from the day the surcharge was applied? Is not this wrong? Will he take steps to ascertain that the surcharge is not levied on stocks which were held prior to the Government statement?

Mr. Mellish: That is really a different question and should be directed to my right hon. Friend the Minister of Public Building and Works.

Mr. Boyd-Carpenter: As it is clear from the hon. Gentleman's answer that there will be some increase in the cost of housing without any benefit to our balance of payments position, may I ask him to make representations to the Chancellor of the Exchequer for the removal of the surcharge on vital materials used for housing?

Mr. Mellish: No, Sir.

Sir H. Butcher: On a point of order, Mr. Deputy-Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment.

Factory-made Houses

Mr. Dodds: asked the Minister of Housing and Local Government what proposals he has to encourage the use on a large scale of factory-made houses in future housing programmes.

Mr. Mellish: The Government's aim is greater productivity in house building, through the improvement of traditional and the development of industrialised methods.
My right hon. Friend is encouraging the industrial approach by ensuring that local authorities know what systems are available and by encouraging them to collaborate in placing big orders.
Work is continuing on the development of the two industrialised systems

which my Department has designed. A prototype block using the second of these—12M—has now been completed for demonstration purposes at Oldham and is available for inspection until 5th December, 1964. The Department is also working with the National Building Agency to extend the scope of guidance and help to local authorities in the selection and use of promising systems.

Rent Tribunals (Staff)

Mr. Frank Allaun: asked the Minister of Housing and Local Government if he will consider giving Civil Service status to the staff of rent tribunals.

Mr. Crossman: I would refer my hon. Friend to the Answer I gave to a Question by my hon. Friend the Member for Bilston (Mr. Robert Edwards) on 17th November.

Mr. Allaun: May we gather from that Answer that the Minister is distinctly sympathetic both to rent tribunals and to the status of their staffs?

Mr. Crossman: It would be a lot to gather from that Answer. What I will say to my hon. Friend is that this is a very important question which closely relates to the big Bill that we are now preparing for a new system of rent control. Once we know more clearly what that system is to be we can see the role which the tribunals will play and we can then discuss the problem of the status of their staff.

Mr. Corfield: Is the right hon. Gentleman implying that he does not know what that Bill will contain?

Mr. Crossman: If the hon. Gentleman thinks that we have every detail of it prepared now I will make a candid revelation: we have minds with which we are still thinking.

Vacant Houses (Compulsory Acquisition)

Mr. Frank Allaun: asked the Minister of Housing and Local Government if he will take steps to make a survey of all houses which have been vacant for more than two months; and if he will introduce legislation permitting local authorities to purchase such houses compulsorily and let them at reasonable


rents, except where there are special reasons for the continued vacancy.

Mr. Mellish: Local authorities have a duty to review housing conditions and needs in their districts. Under existing legislation they have power to acquire vacant houses by agreement or compulsorily, if they need them to fulfil their housing responsibilities.

Mr. Allaun: Is my hon. Friend aware that it is bitterly galling to the homeless to see tens of thousands of houses lying empty usually because the owners are holding out for a high price and that meanwhile vandals break into the houses and rats and rubbish accumulate, causing great nuisance to the neighbours?

Mr. Mellish: I quite accept that, when a person is in great need of a house of his own, to see property empty is, as my hon. Friend describes it, a galling experience. All I can say to him is that we believe that the existing legislation enables local authorities to consider compulsorily acquiring such houses if they think fit. It is, therefore, a matter for the local authorities concerned to take some action.

Mr. Prior: Will not the Bill going through the House at present result in many more houses lying empty with vacant possession and not being available for reletting.

Mr. Mellish: That is a matter of opinion, and I do not agree with the hon. Member.

Slum Clearance

Mr. Russell Johnston: asked the Minister of Housing and Local Government whether he intends to revise the system upon which the extent of the need for slum clearance is established.

Mr. Crossman: A revision is overdue. I shall shortly be asking local authorities to bring up to date their assessments of their slum clearance needs, and will then review the situation generally.

Mr. Johnston: Is the right hon. Gentleman aware that local authorities' assessments dc not always give a very accurate picture of the situation, in that to some degree they are tempered by the ability of the local authority to deal with the problem properly? Also, they do not take into account the lack of modern

amenities such as a supply of water and a bath. Will he take this into account and consider a national survey?

Mr. Crossman: I am well aware of the remarkable variations in the standards of local authorities in their definition of a slum. Every effort will be made to remedy that, but it would he a great mistake merely to rely on a national survey. I want the collaboration of the local authorities, and they all have their own methods of reviewing their problems.

Mortgages (Young People)

Mr. Abse: asked the Minister of Housing and Local Government whether, in view of the large number of marriages now taking place of men and women under 21 years of age, he will expedite the discussions being held between his Department and the Lord Chancellor to consider the possibility of local authorities being permitted to advance mortgages to those under 21 years of age who, having married, wish to purchase a house of their own.

Mr. Crossman: I am pursuing discussion with my right hon. and learned Friends and I hope to be able to write to my hon. Friend in a few weeks.

Mr. Abse: Does not the Minister regard it as absurd that society approves of and encourages people to be married at 21 and does not permit them to own a house of their own? Would it not be a contribution to the stabilisation of young marriages if the steps suggested were taken? Would the right hon. Gentleman please understand that if any objections were forthcoming from lawyers it is more important to concern himself with the thousands of young marriages than it is to concern himself with the heirs to inherited wealth and with some people who may be affected by the change in the present rule?

Mr. Crossman: I think that others beside my hon. Friend are concerned with this problem and there are some genuine issues at stake in deciding whether one should permit children to become mortgagors. If I understand the law aright, under Section 43 of the 1958 Act it is possible for a local council to adopt the devices now used by building societies, whereby money is advanced to


someone else holding the legal estate on behalf of the infants. It would be untrue to give the impression that this could never be done in the case of people under 21. As to whether these devices are sufficient, on this I intend to wait until I get a collective body of evidence on which to decide.

Mr. Allason: Is the right hon. Gentleman aware that there is a difficulty even when he accepts this guarantor system—that when the parent is himself trying to get a mortgage, the local authority will not accept a mortgage both from the parent and the infant?

Mr. Crossman: I am aware of this. This is precisely why there is a case to be considered for a change in the law in this regard.

Mr. Abse: On a point of order. I beg to give notice that in view of the unsatisfactory nature of that reply I will raise the matter on the Adjournment.

Mortgages (Interest Rates)

Mr. Peter Walker: asked the Minister of Housing and Local Government what measures he will introduce to reduce interest rates for house purchase mortgages.

Mr. Fisher: asked the Minister of Housing and Local Government what plans Her Majesty's Government have for the reduction of mortgage interest rates for home owners; and to what level of interest they propose to reduce them.

Mr. Gower: asked the Minister of Housing and Local Government what methods he will adopt to reduce mortgage rates for house purchasers.

Mr. Crossman: I have little to add to the replies given to my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) and the hon. Member for Norfolk, Central (Mr. Ian Gilmour) on 17th November, when I explained that I should wish to complete, with the local authority associations, the review of housing subsidies and finance, before any statement is made about interest charges on loans for local authority house building or on mortgages for house purchase.
I should make it plain, however, that help to intending owner-occupiers would

require legislation and that there will not be time for that this Session—[Laughter.]—hon. Gentlemen had better hear the whole of the answer before they laugh. This will give time for the necessary discussions with the representatives of building societies about the way in which help can best be given.

Mr. Walker: Is the right hon. Gentleman aware that this reply will bring bitter disappointment to many people who are hoping to purchase a house? Is he also aware that after yesterday's statement about the Bank Rate these people will want a clear undertaking by the right hon. Gentleman that interest rates on mortgage repayments will not rise as a result of this Government's action? Will he also confirm that any action will treat all people alike and not favour those who want new mortgages?

Mr. Crossman: I ask the hon. Gentleman to make a distinction between the long-term problems which I want to discuss with the building societies and the short-term problem of interest rates in the present economic crisis. It should not be assumed that the increase in the Bank Rate will be followed by similar increases in other long-term rates, and I am very encouraged to see that representatives of the building societies have already made this clear. With regard to the long-term issues, we have made and shall keep our pledge to introduce special advantages for new mortgages. As I say, we need to discuss this with the building societies. We have started doing so and we shall complete the job, and then legislate, in the next Session.

Mr. Fisher: In view of the 7 per cent. Bank Rate, would it not be realistic to acknowledge that building society rates are virtually certain to have to go up in the near future? In view of that, has the right hon. Gentleman a two-tier system of interest rates in mind? Will it have to be subsidised by the taxpayers? If so, what will it cost and what level of mortgage interest has he in mind as the subsidised rate?

Mr. Crossman: The hon. Gentleman alleged in his supplementary question that rates of interest for building societies were bound to rise now. I should like him to notice that Mr. Lewis Cohen, Chairman of the Alliance Building Society—[Laughter.] We will start with


him. He said, "It is too early to say. It all depends on how long 7 per cent. lasts". The Woolwich Equitable Building Society said, "It is only a temporary measure. It should have no effect at all on the rates charged to borrowers." Hon. Members opposite should not jump to the conclusion that this is bound to happen. Surely it is sheer commonsense to wait and to see what is going to happen before insisting that these rates will go up. I see no reason why they should, as a result of measures taken to prevent speculative attacks on the £abroad.

Mr. Arthur Lewis: The Minister referred to a previous Question by myself. Is he aware that for 13 years I put similar Questions and never received a satisfactory Answer until today? I am very pleased indeed, but I had to wait 13 years before I got a favourable Answer.

Mr. Gower: Is the right hon. Gentleman aware that many people in this country were induced to vote for his party by a promise that they would have a reduced cost of house purchase almost immediately? If he introduces the system which he mentioned, will there be any restrictions on a person reselling such a house, obtained at a cheap mortgage, at a profit?

Mr. Crossman: It is, of course, quite untrue that our commitment was to introduce this immediately. In our priorities the first thing we had to do was to help the pensioners and the sick. That was an absolutely correct thing to do. We tell our borrowers that in good time we will carry out the whole policy. This is a five-year policy which we have, not a four-week policy.

Mr. Boyd-Carpenter: Is the Minister aware that very clear assurances were given both by the Prime Minister and by the First Secretary of State, that they aroused very definite expectations among a very large number of people and that his statement that nothing is to be done at least for a year, taken against the inevitable effects of yesterday's announcement, will constitute what many people in this country will regard as a breach of faith?

Mr. Crossman: It is the right hon. Gentleman's own interpretation, quite contrary to what I said, that nothing will be done. I said that time would

be used for a very important job, which is to work out with the building societies the best way of doing this. This is a job which we shall do, and there is no kind of withdrawal from our commitment in what I said—none whatever.

Mr. Gower: On a point of order. In view of the extremely unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest possible moment.

Local Authority Building Contracts

Mrs. Renée Short: asked the Minister of Housing and Local Government, in view of the delays which occur in obtaining planning permission for local authority building contracts, if he will take steps to review the machinery that exists for this purpose.

Mr. MacColl: My right hon. Friend is anxious to avoid all unnecessary delays. If my hon. Friend has any specific case in mind and will give me the details I shall be happy to investigate it.

Mrs. Short: Does my right hon. Friend understand that serious frustration occurs with local authorities when their planning permissions are held up sometimes for months and occasionally for years? Will he undertake to have discussions with the local authority associations to see whether the obsolete planning machinery can be streamlined in order to step up the output of housing?

Mr. MacColl: My right hon. Friend is most anxious to speed up the giving of planning approvals and dealing with these cases, but it would greatly assist him in working out the best way of doing it if right hon. and hon. Members helped by giving particular cases in which the present machinery is breaking down.

Bury St. Edmunds (Town Map)

Mr. Eldon Griffiths: asked the Minister of Housing and Local Government when he will give a decision on the proposed town map for Bury St. Edmunds.

Mr. MacColl: These proposals raised a number of difficult issues about which the Department has been in consultation with the local planning authority. My right hon. Friend hopes, however, to be able to take a decision very soon now.

Mr. Griffiths: While thanking the Minister for a helpful reply, may I urge upon him that this is matter of considerable importance in Bury St. Edmunds, because almost all the available land for industry has already been disposed of or earmarked for use, and it makes for the greatest difficulty in negotiations with industrialists seeking to go to the town that there should be these delays in the approval of the town map?

Mr. MacColl: Yes, but the problem is difficult. Bury St. Edmunds is a very attractive and beautiful town, with a long history. Its proposals are to increase its population by some 10,000 overspill. It is in everyone's interest to be quite certain that this is being done in the right way, and that takes a certain amount of discussion and thought before a final decision is reached. I do not think that it will be in anyone's interest to rush it for the sake of a quick decision.

Cottages, South Dorset (Piped Water)

Mr. Evelyn King: asked the Minister of Housing and Local Government how many cottages in the South Dorset constituency have no piped water supply.

Mr. MacColl: About 850. I am informed that many of them are likely to be connected to the mains within a year.

Mr. King: Is the hon. Gentleman aware that there is in the countryside deep feeling on this matter; that of the many millions of £s the Government are spending on many peculiar projects they should devote the first one or two to seeing that every Englishman has an inalienable right to turn on a tap?

Mr. MacColl: I hope that the hon. Gentleman will not think that I am labouring the obvious when I say that there has not been such an inalienable right for many years. It is not fair to blame us if, in the first month of our

Administration, we have not succeeded in giving every rural household an individual water supply.

Birmingham (Minister's Visit)

Mr. Victor Yates: asked the Minister of Housing and Local Government if he will make a statement on his recent official visit to Birmingham; and what consideration he has given to the urgent need for action to replace the unhealthy houses in Ladywood and the central areas of Birmingham

Mr. Crossman: I was impressed by the amount of rebuilding which has already taken place, but I realise the size and complexity of the problems which remain, and how much Birmingham depends on speedy provision of more land on which to build. The city council, I am happy to say, is tackling these problems with energy and determination. It is resolved to increase its house building rate and I hope that it will be possible to work out a new timetable for the speedier clearing of the slums. In my turn, I have promised to consider a number of questions which were raised with me.

Mr. Yates: While appreciating the Minister's Answer, and while stating that great appreciation was felt in the city for the stimulus which he gave on this occasion, may I ask him if he will very strongly press this question of an earlier timetable for the removal of such unhealthy houses as he had the opportunity of seeing in the central area of my constituency which, if they are allowed to stay for another five or six years, will be completely intolerable for the people concerned?

Mr. Crossman: I agree with my hon. Friend. One of the problems which struck me as I went round was whether the balance of energy has been right which Birmingham has devoted between patching old houses and building new ones. This is an extremely difficult question to answer and I agree that it is a horrifying thought that Birmingham is assuming that for many years large areas of this terrible property will still be there. That is why I urged the necessity for a speedier timetable than has been possible within the last 10 years.

Dame Edith Pitt: Is the Minister urging on the Birmingham City Council


the necessity of stepping up the rate of house building on land which it already owns, because that rate has fallen to nearly half of what it was when the council was Conservative-controlled?

Mr. Crossman: The problem of Birmingham is the extremely limited amount of land available within its own boundaries. It needs land outside. This is one of the major problems with which I am concerned.

Mr. Geoffrey Lloyd: Was the Minister made aware during his tour of Birmingham that the Birmingham City Council has had possession for over four years of the old Castle Bromwich aerodrome in my constituency, where there is room to build 4,000 houses but on which not a single house has yet been built?

Mr. Crossman: One of the things I discussed with Birmingham was the plans it has, and it is now starting to build on that site.

Mr. V. Yates: rose—

Mr. Deputy-Speaker: Order. Does the hon. Member wish to address me on a point of order?

Mr. Yates: No, Sir. I wanted to ask a supplementary question.

Hon. Members: No.

Mr. Yates: rose—

Mr. Deputy-Speaker: Order.

Mr. Yates: The Conservatives did not build a house.

Mr. Deputy-Speaker: Order. I must ask the hon. Member for Ladywood (Mr. V. Yates) to behave in the way he has always behaved in this House, and in conformity with the traditions of the House.

Oral Answers to Questions — SOUTH AFRICA (BUCCANEER AIRCRAFT)

Mr. A. Royle: asked the Prime Minister if he will make a statement on the policy of Her Majesty's Government in regard to the sale of Buccaneer aircraft to South Africa.

The Prime Minister (Mr. Harold Wilson): I hope to make a statement tomorrow.

Mr. Royle: Is the Prime Minister aware that this statement will be welcomed in the country in view of the grave uncertainty which has been caused to the aircraft industry due to the delay in taking a decision on this matter?

The Prime Minister: I suppose that whether it is welcome or not depends on what it says.

Oral Answers to Questions — STRIKES (GENERAL ELECTION)

Mr. Ridley: asked the Prime Minister if he will publish the report of the Minister of Labour into the political motivation of strikes at election times.

The Prime Minister: My right hon. Friend the Minister of Labour is examining the facts in his Department. When this information is available a decision will be taken as to what further action, if any, is required.

Mr. Ridley: Is the Prime Minister aware that it is not only for him to satisfy himself about this matter but that the public have a right to be satisfied, too, that his allegation was wrong, if that is the case? Does he remember that in the case of the Bank Rate tribunal and the Vassall Inquiry, when he made similar allegations, tribunals were set up to prove that he was wrong? Will he give a similar assurance in this case?

The Prime Minister: I have always wondered what was the motive of the then Prime Minister in setting up that tribunal. I did not realise that it was set up to prove that I was wrong.

Mr. Chataway: Will the Prime Minister give one straight answer? Will he or will he not publish it?

The Prime Minister: I will make a statement in the House and then the House can form its own views.

Oral Answers to Questions — RHODESIA

Mr. Turton: asked the Prime Minister whether he envisages any conditions additional to the existence of sufficient representative institutions as a


prerequisite for the grant of independence to Rhodesia.

The Prime Minister: I have nothing to add to what I told the hon. Member in reply to his supplementary question on 17th November.

Mr. Turton: Can the right hon. Gentleman be more explicit? Does he realise that for 40 years there has been an anxiety among all races in Rhodesia about having the possibility of Whitehall interference and control? Does he realise that his letter, published on 2nd October, to Dr. Mutasa, which was a very racialist letter, saying that independence will not be granted so long as there is control by a white minority Government, has caused very great misunderstanding and indignation in Rhodesia? Will he make it clear that independence will be granted immediately there is a broadly based Government respresentative of all political views in Rhodesia?

The Prime Minister: In my supplementary answer to the right hon. Gentleman last week I said that the basis on which we were working—I had explained this earlier in a debate in the House—was clearly on the lines of the words in the communiqué of the Commonwealth Prime Ministers last July. I thought that it was excellent. We are sticking to it.

Mr. Sandys: Since it is quite clear that no agreed solution is likely to be arrived at by further public exchanges between the British Government and the Government in Salisbury, will the Prime Minister take steps in one way or another to ensure that there will be talks either between him and Mr. Smith in London or between the Commonwealth Secretary and the Rhodesia Government in Salisbury?

The Prime Minister: The right hon. Gentleman may have missed one point in what has been happening because I said last week that Mr. Smith and I have agreed that the exchanges now continuing should not be published. Therefore, any reference to public exchanges was a little behind the times. Certainly I look forward to Mr. Smith coming to London, and I have pressed him a number of times to do so.

Oral Answers to Questions — UNITED NATIONS (SECURITY COUNCIL RESOLUTION)

Sir J. Langford-Holt: asked the Prime Minister whether he will give directions to all Ministers that they should take no action which contravenes any resolution passed by the Security Council of the General Assembly of the United Nations.

The Prime Minister: Decisions on all matters which have been the subject of resolutions passed by the Security Council or the General Assembly of the United Nations are a matter for the Cabinet.

Sir J. Langford-Holt: Would the Prime Minister agree that probably the most important of these resolutions is the Declaration of Human Rights, and can he tell me whether the Government propose to adhere to that declaration? Can he also give an assurance that, in the meantime, no action will be taken by any Minister contrary to that declaration?

The Prime Minister: I certainly agree with the hon. Gentleman about the importance of that declaration. I also agree with him about the urgency of coming to a decision about it.

Oral Answers to Questions — UNITED KINGDOM AND FRANCE

Mr. Maxwell: asked the Prime Minister whether he will seek to visit Paris at an early date to hold discussions with the President of France on Anglo-French policy differences.

The Prime Minister: As the House knows, I shall be visiting Washington in December. I am not able at this stage to make any statement about future foreign visits.

Mr. Maxwell: Would my right hon. Friend please bear in mind that the state of our alliance with France is causing a lot of us a great deal of disquiet? Would my right hon. Friend please try to visit France when he returns from the United States, on the same kind of mission as the former Prime Minister, Anthony Eden, undertook in saving N.A.T.O. at the time of the E.D.C. collapse, because our alliance is in that sort of danger now?

The Prime Minister: The whole House has been concerned about our relations with France, certainly for a period of some two years or more. Indeed, it seems, though I am told that this is a coincidence, to have dated from the visit of the former Prime Minister to Rambouillet in December, 1962. But the concern which I think the whole House shares is matched by a desire to improve relations by any way we can and, in the matter of personal talks, the Foreign Secretary will be in Paris for the N.A.T.O. Ministerial meetings, and I hope that he will be having talks with French leaders.

Mr. Biggs-Davison: Further to Rambouillet and all that, which I have myself criticised, did not the last Government do a great deal to improve British relations with France, particularly through the Concord and other advanced projects? Has not the right hon. Gentleman and his Government in a very few days done great damage to our relations with France, relations with whom are the key to a sound European policy for our country, and would le try to make good some of the damage he has done?

The Prime Minister: It must be a matter of opinion exactly how cordial the entente had become in the last year or two. Some of us feel that it was at a very low ebb indeed in March, 1963, when the Government of the day very petulantly interfered with an important Royal visit to Paris and then told the country a complete misstatement of fact as to the reason about it. After that I agree that certain efforts were made to repair the fences in this matter, and I hope that we shall be able to make further progress.

Oral Answers to Questions — PRIME MINISTER (VISIT TO U.S.A)

Mr. Ioan L. Evans: asked the prime minister what plans he has, during his forthcoming visit to the

United States of America, for participating in the meeting of the United Nations General Assembly.

The Prime Minister: On my forthcoming visit to the United States, I expect to call on the Secretary General of the United Nations in New York. Unfortunately, on this occasion, I shall be unable to take part in the proceedings of the United Nations General Assembly. I hope to do so, however, in the New Year.

Mr. Evans: I thank the Prime Minister for that encouraging reply. When he addresses the United Nations will he reiterate and reaffirm the sentiments which he expressed at the Lord Mayor's Banquet, which were well received in the country?

The Prime Minister: What I said at the Guildhall—and I hope that I was speaking for the whole House, although I have one or two doubts about that—is the line the Government are taking in United Nations matters. I hope to develop the point further if, as I hope, I can speak there early in the new year. The reason why it was not possible on this occasion to stay longer in New York and to make a speech there is that I felt it right, and I am sure that the whole House will agree, to go on to Canada and have discussions with the Canadian Government before returning to London.

Oral Answers to Questions — BILL PRESENTED

EDUCATION (SCOTLAND)

Bill to amend paragraph 20 of Schedule 3 to the Education (Scotland) Act 1962 to enable provision to be made for the payment of pensions to the widows or other dependants of teachers who die without having completed 10 years' service, presented by Mr. Ross; supported by Mr. Niall MacDermot, and Mrs. Judith Hart; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 15.]

Orders of the Day — FINANCE BILL

Order for Second Reading read.

3.32 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan): I beg to move, That the Bill be now read a Second time.
I hope that it will not be thought faintly improper if I deal with the Finance Bill this afternoon. I should like to start by putting the subjects in the Clauses to some examination, as I have no doubt we will do in more detail in Committee.
Clauses 1 and 2 give effect to my proposals with regard to Income Tax and the duty on hydrocarbon oils. Clause 1(1) raises the standard rate for the coming Income Tax year from 7s. 9d. in the £ to 8s. 3d. in the £. Subsection (2) will maintain the reduced rates of Income Tax, which are chargeable on the first slices of taxable income of individuals after personal allowances have been given, at their present levels. These are 4s. in the £ on the first £100 of taxable income and 6s. in the £ on the next £200 of taxable income.
Some questions have been asked about the Surtax rates mentioned in subsection (1). This is the normal and technical method of dealing with this situation. Subsection (1) leaves the rates of Surtax for 1965–66, which will be payable on 1st January, 1967, to be determined in a later Bill, and no conclusions should be drawn from that, one way or the other. It is a purely technical matter. It is normal for Surtax for a year to be dealt with in the Finance Bill in the year in which the Surtax is due. Thus, the Finance Act, 1964, fixed the rates of Income Tax for 1964–65 and left the Surtax for 1964–65, which will be payable on 1st January, 1966, for a later Bill. This will be covered in the 1965 Finance Bill.
As the House knows, the increase in the standard rate is estimated to yield £122 million next year. I think that the House is agreed that it was right to leave the reduced rates at their present levels, so ensuring that the additional tax which will fall on our citizens will he borne by those who have the higher

incomes. I believe that that is generally accepted. Indeed, there has been surprisingly little criticism—I expected more—about the increase in the Income Tax. I known that hon. Members opposite voted against it, but that was a purely instinctive paroxysm, and does not represent the true feelings in their constituencies. I am glad to say that the lowest income groups will not be affected by these changes.
As to the oil duties, I explained in my Budget speech the importance of the contribution which the increases in the rates of duty on hydrocarbon oils will make to the overall plan of the Budget. Clause 2 gives effect to the increase of 6d. a gallon in the Customs duty on light hydrocarbon oils and on heavy hydrocarbon oils for use as fuel in road vehicles. It also increases by 6d. a gallon the Excise duties on similar oils of indigenous origin, and on petrol substitutes and power methylated spirits. The yield of the Excise duties on petrol substitutes and power methylated spirits is very small; their purpose is merely to protect the yield from the main oil duty.
At present, the Excise duty on indigenous oil is at a rate 1 s. 3d. a gallon less than the corresponding Customs duty. This difference is due to be removed by the end of the year under the E.F.T.A. Convention, and the necessary provisions were contained in Section 5 of the Finance Act which the right hon. Member for Barnet (Mr. Maudling) introduced earlier in this year. For convenience of reference, these provisions are reproduced and re-enacted in the present Clause.
The House will be aware that my right hon. Friend the Minister of Transport has begun discussions with representatives of the bus operators' associations, as I suggested in the Budget speech he should do. The discussions are still at the exploratory stage. I do not think that they have caused dissatisfaction in those with whom they are being conducted. Any necessary legislation resulting from them will be introduced separately.
I turn to Clause 3, which is concerned with the temporary charges on imports. The choice in the short term lay between the limitation of imports either by quantitative restrictions or by temporary


import charges. I do not know what the view of the Opposition is about this. I do not know whether they argue that there should have been no restriction on imports, or that the restrictions should have been quantitative or, thirdly, imposed through the method we employed—namely, the surcharge—but it is up to the Opposition to express a decision for one of those three courses.
We are entitled to ask whether they believe that the situation which existed on 16th October—I state it in completely neutral terms—required no action or, if it did require action, whether it required action by means of quantitative restrictions that would have been legal, or by means of the surcharge. As I understood the initial reaction of the former Chancellor, the right hon. Member for Barnet, who said that we had inherited the diagnosis and the solution, he thought that the surcharge was the right way to do it, but was he speaking for himself or for the Conservative Party when he said that?

Sir Harmar Nicholls: Sir Harmar Nicholls (Peterborough) rose—

Mr. Callaghan: I do not know whether the right hon. Member for Barnet has appointed the hon. Gentleman as his spokesman on the matter, but I am quite ready to hear him.

Sir H. Nicholls: The electors of Peterborough appointed me their spokesman in this House. Quite apart from what my right hon. Friend may have in mind, the right hon. Gentleman should tell the House whether or not he now feels—he having decided that the surcharge was right—satisfied that the precipitate way in which he put it on was the right way at the time.

Mr. Callaghan: The hon. Gentleman will not be disappointed. I shall come to that point, but I do not think that I should be diverted from trying to cast a line over the Opposition to see where they stand on this issue. We are entitled to a clear answer from the Opposition whether they think that action was or was not required. They ought to tell us which of those two views they hold. In our view, in the situation in which we found ourselves, this action was required. We have been confirmed in that view by those in other countries who take, per-

haps, a more impartial view—[HON. MEMBERS: "The E.F.T.A. countries?"]—of our affairs than we do ourselves. Certainly, Mr. Pierre-Paul Schweitzer, as I said on an earlier occasion, said, when he heard of this surcharge—and he, after all, is Director of the International Monetary Fund—that he thought surcharges were the least objectionable way of doing something that had to be done. I am paraphrasing, but hon. Members will know that I am paraphrasing reasonably accurately.
I am entitled to ask the Opposition, who had charge of the affairs of this country until a month ago: do they agree that action needed to be taken or do they not?

Mr. Sydney Silverman: While asking the Opposition for a reply to that question, does my right hon. Friend agree that there is another question to which we are entitled to have an answer? Their other criticism was that my right hon. Friend's object had no relevance to our existing economic difficulties and that other things ought to have been done. Are not the Opposition under an obligation to say what the other things are that they would like my right hon. Friend to do?

Mr. Callaghan: I am grateful to my hon. Friend and I hope the right hon. Member for Barnet will give an answer to that question, also.
There was the choice to be made. I believe that part of the Conservative Party was in favour of it. Certainly, I thought that that part which used to be in the Treasury was in favour of it, but I am not so certain about that part which used to be in the Board of Trade. Whether that was a purely domestic difference between those struggling for other prizes, I do not know.
Incidentally, I understand that we are to have a slashing attack by the right hon. Member for Barnet this afternoon. I only say that I do not think that he need run too hard to beat his right hon. Friend the Member for Bexley (Mr. Heath). His natural qualities will stand him in good stead. As between quantitative restrictions and import charges there was a choice to be made and I think that I have shown why we had a preference for the import charges. It is because they are more flexible, less arbitrary and involve less


interference with the established patterns and channels of trade.
In addition, to have introduced quantitative restrictions would have involved unacceptable delays in bringing them into effect. While the apparatus was building up, the inflow of imports would have gone unstemmed. The other point about import charges is that they do not stop trade arbitrarily. They have been applied to the widest possible range of goods, excluding, of course, foodstuffs and raw materials, so that we have avoided heavy selective incidence on particular exporting countries or types of goods as far as possible. This ought to be noted by the House in reference to some of the criticisms which have been made. They also have a built-in disinflationary effect to help to offset the pressure on domestic resources which import restrictions would otherwise have caused.
For all these reasons I think that it was right to choose the temporary import surcharges. They are less damaging. Less damaging is the best way of putting it, because I do not deny that they are damaging—of course they are, and hon. Members ought to agree on that. But it was necessary to impose them. Of all the measures open to us the least damaging to our economy and the interests of trade and the interests of our trading partners is the surcharge. The Government do not claim that the charge comes within the terms of Article XII of the G.A.T.T. or Article 19 of the Stockholm E.F.T.A. Convention, but I point out that these articles provide for the use of quantitative restrictions on imports to correct a serious balance of payments deficit.
There is no dispute among the E.F.T.A. countries, or indeed among the signatories of the G.A.T.T., that a nation is entitled to use quantitative measures to restrict the import of goods when its balance of payments is in a serious situation. Although the use of quantitative restrictions would have brought the United Kingdom within the terms of the G.A.T.T. and the Stockholm Convention, and there could be no legal complaint, in the view of the Government, this would have been more damaging, especially to E.F.T.A. countries and our other trading partners, as well as to the United Kingdom market. I regret very much that the E.F.T.A.

countries have suffered in this way as well as others, including Eire and other parts of the Commonwealth.
Should we have consulted them beforehand? I ask hon. Members opposite to consider what the effect then would have been. If we had consulted the E.F.T.A. countries about whether we should or could impose a surcharge, or whether we could or should impose quantitative restrictions, do not hon. Members opposite think that the effect would have been that those countries would have immediately anticipated any restrictions that were to be put on?

Sir Harmar Nicholls: Oh, no.

Mr. Callaghan: The hon. Member for Peterborough should say, "Oh, no". It so happens that because of the peculiar difficulties across the border between Eire and Northern Ireland there were a few hours after the announcement was made when, because of the initiative and dash of the Irish, goods poured across that border in an effort to beat the bell. Good luck to them. That was on a small scale and could be tolerated, but what would have been the effect of going into long, detailed conversations with E.F.T.A. countries and asking them if we could please impose a surcharge to keep their goods out?

Sir Harmar Nicholls: Sir Harmar Nicholls rose—

Mr. Callaghan: I have given way to the hon. Member once.

Mr. John Hall: I thank the right hon. Gentleman for his courtesy in giving way to me. May I ask whether he consulted the United States of America?

Mr. Callaghan: Consultation took place, I regret to say, on this occasion with no one. Countries were informed as soon as we were in a position to inform them, but that was the pace at which we had to take action.
I come back to the main point. I do not think that what has been said detracts in any way from the point I am making, which is that to have had consultations would have destroyed the whole purpose of the surcharges.

Sir Harmar Nicholls: Sir Harmar Nicholls rose—

Hon. Members: Sit down.

Sir Harmar Nicholls: On a point of order. The right hon. Gentleman, in the context of his speech, referred to the hon. Member for Peterborough. Is it not the convention that when he does that he should allow me to interrupt?

Mr. Deputy-Speaker (Dr. Horace King): The hon. Member for Peterborough (Sir Harmar Nicholls) has already intervened once by courtesy of the right hon. Gentleman. There is no convention that the right hon. Gentleman should allow him to intervene again. It is a matter for the right hon. Gentleman to decide.

Mr. Callaghan: I have a rather long speech to make to explain the Bill, because there is much in it. [Interruption.] The right hon. Member for Flint, West (Mr. Birch) does not have to stay if he does not want to do so. He can go.
The House may like to hear why the charge was proposed initially at 15 per cent. That, admittedly, is a high figure. Its height corresponds to the size of the balance of payments problem which faces us. The same reason broadly explains why the Bill provides for this rate to he applied uniformly across the area of imports not exempted. If we are to achieve the necessary saving in imports, a lower rate for some products must mean a higher rate for others.
Bearing in mind that the import charge leaves it to buyers in this country to decide for themselves the imports for which they are prepared to pay the higher price, the Government considered that a uniform rate was preferable, certainly at the outset, to attempting themselves arbitrarily to dictate this choice. The import of goods now subject to the charge amounted to £1,350 million in 1963 and the annual rate in 1964, estimated on the latest information, would have been about £1,700 million. A further increase would have occurred in 1965 if no action had been taken.
As I explained in my Budget statement, we expect the 15 per cent. surcharge to produce a saving in imports at an annual rate approaching £300 million. This estimate is inevitably speculative and the true effect may not be clearly discernible for some time. We shall keep a close watch on it, both in total and in detail, and will be ready to use the

powers which the Finance Bill provides for downward adjustments, in whatever manner seems to be most appropriate, as rapidly as the balance of payments situation permits.
Meantime, let us get into perspective the scale of the import saving. The estimates which I have just mentioned mean that we expect imports of goods subject to charge, taken as a whole, to remain at a higher level than in 1963. It is important that the House as a whole should recognise the great volume of imports that were sweeping through the Customs and into this country during the last eight or nine months.
Now, as to duration. I should like to call the attention of the House to Clause 3(11) and (12), because the duration is a point on which the House, as well as other countries, is particularly concerned. These subsections provide that the power to impose the import charge will expire at the end of November, 1965, unless the House were to resolve that the power should be extended for a further year. In addition, the charge can be reduced or abolished at any time by order under subsection (9).
I stress again the temporary nature of the scheme. The Government intend to reduce and abolish the charges as quickly as possible, but to give any indication of the likely duration of the scheme is not possible. We must wait and see how quickly the balance of payments position improves. I re-emphasise, however, that the Government intend the import charge to provide a breathing space during which our other measures to remedy the balance of payments problem can begin to take effect. The charge will be kept under review. While it is not possible to fix precise dates for reducing or eliminating the charge, it is intended that this process will begin in a matter of months.
Now, about the protective effect—

Sir Cyril Osborne: If these measures are temporary and they merely dam up the demand for imports by British industry, will not a much greater demand be created immediately these measures are removed and, therefore, leave the balance of payments the same over a period?

Mr. Callaghan: That is a valid point and it illustrates the difficulties of any


action taken in this field. That is why, although other countries might desire a date, I would resist any attempt to put a date for reductions at this stage, because that would have a damming-up effect. We must, however, assume, as I do assume, that in the light of the measures that the Government are taking our balance of payments situation will improve to the point where we can make natural reductions in the temporary surcharge. That is our intention and our policy.

Mr. E. Shinwell: May I ask a question on this most important and interesting point? As the balance of payments position improves, will the Government consider reducing the surcharge on some industries which are more adversely affected than others?

Mr. Callaghan: At the moment, I would prefer, with my right hon. Friend's permission, not to be drawn into that field. I want to keep both the scope and the level under review.
It is a little early yet—the charges have been in force only two or three weeks since 26th October—to talk about the nature of the reductions, either in scope, in range or in rate. I promise the House, however, and it is the keen desire of my right hon. Friend the First Secretary, and, indeed, of all of us, that we shall keep these matters under review in order to make such adjustments in the position as we can to help industry generally in this way.

Mr. Christopher Chataway: Mr. Christopher Chataway (Lewisham, North) rose—

Mr. Callaghan: I must get on. I hope that the House will agree that I have given way a great deal.
The House will, I think, agree and would want it said that whatever other differences we may have, British manufacturers would be entirely mistaken if they thought of sheltering under the import charges as a protective umbrella. When the time comes to reduce and remove the charges, this will be done. These measures are completely non-discriminatory as regards countries of origin and the coverage has been decided on as broad a basis as possible to lighten the incidence of the charge on individual countries or groups of countries.
In a multilateral system of trade and payments, imports from every source make an equal effect upon our balance of payments—that is why it was impossible to discriminate. It would undermine the whole object if savings in imports from one source were replaced by additional imports from other, unrestricted, sources or by the increases in price which could be charged for exports from unrestricted sources.
Now, about coverage. I said that the 15 per cent. temporary charge would apply substantially to all imports except for certain important items, namely food, feedingstuffs, fuel. unmanuafactured raw materials and unmanufactured tobacco. I also announced that books and periodicals, large ships, heavy aircraft and components used by British shipbuilders in the manufacture, repair and fitting of exempt ships in registered shipyards would be exempted. There are problems which will undoubtedly arise on the inclusion of some goods and the exclusion of others from the list of exemptions in Schedule 1 of the Bill. As I said earlier, the charge covers a range of imports amounting to £1,350 million. The phrase "basic raw materials" has been used in a generally descriptive sense. We have not attempted to apply it with precision because, obviously, there are many opinions about what is a raw material. My hon. Friend the Chief Secretary explained in the House in the debate on the Address what we had done and it is important that this should be understood. We have adopted as a guide the general principle that materials which have undergone only elementary processing should be exempted. Thus, all wood and timber is exempt up to the stage of planing or further manufacture. Raw hides and undressed leather are exempt, but leather which is dressed or further manufactured is not.
I am aware that even such a principle has no generally accepted rules which could be applied precisely and consistently over the whole field. I believe that the list now incorporated in the First Schedule to the Bill is generally about right for the purpose that we have in mind. We shall ask for the support of the House in not making any major changes in it at this stage. I am considering a small group of items which, on a strict application of the general principle,


should be added to the First Schedule and I shall suggest Amendments in Committee.
I shall, of course, always be ready to consider any similar glaring anomalies which hon. Members may alight upon. Whatever we do, the list cannot of its nature be wholly consistent. All but the most major and important imperfections causing serious and widespread hardship must be accepted for the time being, bearing in mind the cause of the charge and our intention to reduce and remove it as soon as possible.
We have not attempted to select items for the exemption list on the basis of availability or non-availability in the United Kingdom. I must emphasise what my hon. Friend the Chief Secretary to the Treasury said in the debate on 12th November. This would not only be impossible to apply on any sensible basis in practice, but it would give the scheme a wholly unacceptable protective character.
It follows that over whole scope of the charge there will be items, whether in the form of materials for industry or of productive machinery such as machine tools of all kinds, which are not produced here which will bear the charge. It should be emphasised that this accords with the intention of the scheme to reduce the import bill over a wide field. It would be illogical to apply the charge to finished manufactures, but not to components or semi- manufactures from which they are made—for example, to apply it to complete cars but not to the components of those cars. A system which exempted goods from the charge because there was a requirement for them would defeat its object. On the other hand, it would not be practicable to go into the question of need or essentiality in each case, nor could this be appropriate in a temporary scheme.
Drawback, to which Clause 5 relates, is an important element in the temporary scheme. It is the intention of the Government that the charge should, as far as is physically and practically possible, not have any adverse effect on our exports of products which are made from or incorporate imported goods which bear the charge. The Bill contains provisions in Clause 5 and Schedule 2 which permit drawback or remission of charge on such goods.

Mr. J. T. Price: I rise briefly to intervene on this point of drawback. I am advised by manufacturers in my constituency, in Lancashire, that the present provisions for drawback in circumstances where the major product goes for export are so technical and complex that they are unworkable for ordinary businesses concerned. I have information which I will give to my right hon. Friend.
I have discussed this with the Board of Trade, whose officials now agree with me that these provisions are intensely complicated. I would not personally place too much value on the drawback provisions, because to a large extent they are not workable in their present state.

Sir Arthur Vere Harvey: Sir Arthur Vere Harvey (Macclesfield) rose—

Mr. Callaghan: I must get on.

Sir A. V. Harvey: My question follows on that one.

Mr. Callaghan: I am sure that it does. I am sure that there are hundreds of points which could be raised on this, but there will be a Committee stage and I am sure that a great many of these points can be raised then.
I can say that my hon. Friend the Financial Secretary will attempt to deal with this point in the course of his winding-up remarks. He has already noted it, because it is known.
Where there is already a scheme in operation for drawback of protective duties it will be most convenient to all concerned to use this scheme also for giving drawback of the temporary import charge. In other cases the Customs will, under the terms of flexibility of the Bill, have the necessary powers and method to repay or remit the charge wherever it is shown to their satisfaction to have been paid on goods incorporated in, or used in, the manufacture of goods for export. In many instances, particularly where imported goods have not changed their form, this should present little difficulty. The more complicated cases will take a longer time to settle, but we shall do all we can to facilitate these repayments. Exporters who use imported goods which bear the charge should get into touch with their local Customs officers.
We have received a number of complaints because the charge will apply to


goods in transit and those previously ordered. I should emphasise that relief on such goods would not be justified because the charge must have an immediate effect and it would defeat this important object to give relief. Moreover, it has been the normal practice for many years to apply changes in taxation, for example, Excise duties and import duties, without exception from a precise point in time and at a precise stage, and I think that we must stick to this. Contracts are not frustrated as a result of this procedure. Indeed, exporters will, in general, be safeguarded by their contracts; and the charge is, of course, payable by the importer. Thus, proposals to exempt goods in transit or on order are a means of postponing the application of the charge, which in the present situation the Government could not contemplate.
There will be instances where contracts have been made at fixed prices. As a correspondent in one of the newspapers pointed out, Section 10(1) of the Finance Act, 1901, permits the addition of new duties to the contract price provided that there is no specific agreement to the contrary. In Clause 3(8) of the Bill there is a provision the intention of which is to allow the addition of the temporary charge to the contract price even where there is a specific agreement that the price includes Customs duties. This will help particularly exporters in certain countries who have made contracts at duty-inclusive prices.
I have spent some time on the import duties because I think they are of real concern to industry, and it is important that we should clear up as many of the questions which emerge as soon as we can. Now I would say a word about Clauses 7 to 9 and the Third Schedule on export rebates.
It is generally accepted, I think, that most indirect taxation is passed on by the businesses which incur it in the form of an element in the price of their goods or services, and so it comes to rest against final expenditure in the home market. Under existing arrangements export trade is, very broadly speaking, relieved of indirect taxation by two methods. Exported goods are either excepted from the tax charge, as in the

case of Purchase Tax goods, or drawback is allowed of tax which has been paid at an earlier stage, as with beer and tobacco. But these arrangements do not entirely relieve exports from indirect taxation.
Some elements of tax paid at earlier stages of the process of production enter into export costs, but cannot be precisely identified in the cost of the exported goods. These include vehicle licence duties, the hydrocarbon oil duty, and some elements of Purchase Tax, for example, on business stationery. We estimate that the unrelieved element of tax in export costs due to these may approach £75 million a year, and the purpose of the new scheme is as far as possible to relieve the export trade of these elements of taxation.
The Treasury is given powers under Clauses 7, 8 and 9 to prescribe by Order, subject to negative Resolution, the classes of goods in respect of which the rebate shall be payable, the rates of rebate applicable to various classes of goods, and the criteria for determining whether particular classes of goods are to be regarded as produced or manufactured in the United Kingdom so as to qualify for the rebate. The Commissioners of Customs and Excise are empowered to make provisions about the manner and time of making applications, to require evidence, and to investigate and pay claims.
Rates of rebate necessarily must be an average. The calculation of fair and defensible average rates for different classes of goods is a complex statistical operation. Work is going on on it now, and I cannot yet announce what the rates of rebate will be on particular classes of goods, but they will be based on the latest available statistical information and will be subject to review in future if significant changes occur, for example, in the level of the rebateable taxes.
There is always a fear, and a justifiable fear, I think, when a scheme of this kind is introduced, that business will be faced with a mass of extra paperwork for a comparatively small return. I have to admit that the Clauses as they stand may give an impression of some complexity, but I should like to reassure the House about this. The intention is to work the scheme from the type of


record which exporters will, in the normal coarse of business, have in their possession, without a great deal of additional documentation. Our desire to make the scheme fit existing commercial practice has in fact, in some ways, made the draftsman's task more difficult.
I have seen many other schemes described in the newspapers, and I have followed them with great care and I have had them examined, and I can say to the House that no scheme which has been suggested in any of the public prints matches the requirements of involving both the exporters themselves and the administration in the minimum of work. If anyone finds such a scheme, of course I will look at it and consider what it contains. There have been a number of schemes by writers of letters, but when we have looked at them we have found them not to be applicable throughout industry.
Meanwhile, I am urgently searching for further ways of making exports more profitable, and the First Secretary and the President of the Board of Trade are pursuing in other directions steps for removing remaining obstacles to exports. Within the new pattern of interest rates the arrangements made by bankers and insurance companies to provide medium-term finance for exports will continue to operate at the old rate. Secondly, the Government will see to it that the premiums charged by the Export Credits Guarantee Department will not be raised. We are now, as a matter of urgency, examining other means of helping exports. Within our international obligations we shall not hesitate to give all help to our exporters wherever we believe it is reasonable to do so.
I think that we have all been disappointed by the inability of successive Governments to devise effective export incentives which do not fall foul of our international obligations. We shall press on urgently with further inquiries about this, and I am not defeatist about it. If we are successful I know that we shall have the full backing of the House as a whole.
I think that I have covered the details of most of the Clauses in the Bill and I should like to say a word now about the corporation tax and the capital

gains tax. It has been suggested that business activity will be adversely affected by uncertainty. Business activity is always affected by uncertainty, but I am proposing these changes in the tax system because I believe that they are of long-term economic advantage to the country. A clear balance of advantage lies in making the changes and in announcing them. I am giving opportunity for discussion now so that the Finance Bill will be based upon a considerable amount of public discussion, throwing up points which need to be incorporated in the new legislation.
I have given myself a formidable task in the next few months, and I shall try to reduce the period of uncertainty to the minimum. If I feel that on some issues I can make a preliminary statement of our intentions, I shall do so. I do not think that anything like a complete scheme could be published in advance, partly because of the magnitude of the task, but also because, on looking through the correspondence which has taken place, it is clear that some of the anxiety revolves round the rate of tax, and whatever may be expected outside, I do not think than any hon. Member would expect me to announce the rate of tax in advance of next April. But if I can, as I think I can, identify some general issues on which I can make a statement, I shall do so.
There are, however, two points affecting the capital gains tax which I can mention now. One, I know, has caused anxiety. I said in my Budget statement that the charge could not exceed the difference between the value of the particular asset on the 1965 Budget day and the amount realised when it is disposed of subsequently. Obviously, this did not mean that I proposed to tax a notional gain if there was a loss, and I now make it clear, in case there is any misunderstanding, that I do not propose that the charge to capital gains tax arising on a sale after the next Budget day shall be on an amount greater than any gain that is realised. I think that that will at least remove some of the misapprehensions which have existed.

Sir Beresford Craddock: Could the right hon. Gentleman define,


at this stage, what he means by an asset? This is rather important.

Mr. Callaghan: I would prefer not to be drawn into that without some more technical advice, because I recognise that Parliamentary draftsmen spend a lot of time defining the terms, but I hope that the hon. Gentleman will feel that this gives some general indication in particular cases where I know there has been some concern as to what the future is likely to be.
Secondly, I have seen it suggested that my announcement about the 1965 Budget day value will give the skilful operator splendid opportunities of rigging the market to avoid the tax. I think that we had better wait and see what these risks amount to. The basis will be the genuine market value. If people are able to produce artificially high values which are above the true market value by 1965 Budget day, we can no doubt deal with the situation, and I would expect the support of the House in so doing. We must watch what happens between now and next year's Budget day, and we shall not hesitate to take remedial action in next year's Finance Bill if it should prove to be necessary.
I should like to say one or two words, in conclusion, about the economic situation generally, to try to get the position quite clear as I see it. We expect that the principal effect of the higher Bank Rate which was announced by the Bank of England yesterday will appear in international capital flows. It should apply a sharp corrective to the outflow which has been taking place in the last couple of weeks.
As regards the home economy, the rise in Bank Rate is a reinforcement of our earlier measures to check the pressure of demand and so release resources for export and for import substitution. It is not the Government's desire or policy that there should be a downward revision of investment plans, and it is not our expectation that any such revision will follow. There may be some effect on the phasing of investment projects and there may be an early reduction in the rate of investment in stocks.
Capital investment allowances are, of course, important in the case of the

domestic investment plans, and I hope to see those investment projects going on, but the rephasing of investment projects should help to release capital goods for exports. A reduction in stock-building from the recent high rate should help to reduce imports. The fact that it is necessary to regulate demand in this way does not mean that the Government are abandoning their determination to maintain full employment and to seek a higher rate of growth. Successful short-term regulation of the economy is a prerequisite of successful long-run policies.
As to bank lending, the position of the banks is such that they will wish in the coming months to moderate the expansion of their lending in the interests of their liquidity position, and the normal seasonal pressure will reinforce this tendency. Some tightening up should have the natural result in the present situation, of making a contribution to preserving a proper balance in the economy. I shall continue to watch the monetary situation very closely, and if further action seems to be necessary I shall take it.
I have explained before, in the Budget statement, that I expect the balance of payments to improve sharply as the special factors weighing on it in 1964 come to an end, and as our direct corrective measures bite home. There is nothing new about that. We expect the import charge to have a strong effect on imports, which will soon be at the rate of between £200 and £300 million a year. The need to divert resources from domestic use to match this improvement in the balance of payments remains as important as ever, and this, of course, is where the Budget changes come in. The disinflationary effect of the Budget is greater than many people have understood or have said. The immediate effect of the various decisions is to increase revenue at the annual rate of about £220 million, that is, the revenue of about £200 million a year from the charge on imports, plus the £93 million from the increase on petrol and derv, less the £75 million of the export rebate.
This net increase in revenue will represent a substantial disinflationary force in the economy. Its working cannot be a painless process. From the economic point of view we have also to remember that there will be a reduction in supplies


through the effect of the charge on imports. but in the early stages this will be matched to a large extent by de-stocking, and it does not therefore call to the full extent for disinflationary fiscal action. But, by any standards—and I wish to emphasise this—the change in the balance of the Budget of £220 million, getting on for 1 per cent. of the national income, must be regarded as substantial. This is stiff medicine, and I hope that the House will recognise the disinflationary effects of what has been done.
The Government have taken action along three different lines to deal with the situation of 16th October. First, the 15 per cent. import charge£a temporary measure—to improve the balance of payments by reducing imports, and the rebate on indirect taxes on exports which is a permanent measure and will give a continuing stimulus to sales abroad.
Next, changes in taxation designed to ensure that resources will be released from domestic use to match the improvement in the balance of payments resulting from direct measures. Thirdly, a start on our long-term policies which are designed to make the economy more efficient, more progressive, and more competitive.
These policies, such as the reform of the tax structure, and, more urgently, the fresh start in an attempt to get an incomes policy, a drive for technological improvement, the preparation of a plan covering all the elements of a faster rate of economic growth, and a drive for more exports, add up to a substantial task and to a substantial piece of work for five weeks in the life of the new Government. [Laughter.] Hon. Gentlemen opposite should sit silent. They have no cause to laugh at all. The Government are determined to deal with the situation.
I do not wish to recriminate. I do not intend to go over that, I merely say to the House as a whole—and the Opposition should refrain from laughter—that unless the House and the country recognise the seriousness of this situation, which has been measured by the action which the Government have had to take, we cannot have the drive that is necessary to ensure that this country is fully competitive. [HON. MEMBERS: "No."] It is no use the Opposition saying "No". Are they saying that there is not a serious situation? Is that what they are

saying? [HON. MEMBERS: "You have made it worse."] That is just cheap party stuff.
The situation is of such a character that the country recognizes—I think more than the Opposition do—that there are a great many measures which have to be taken in pursuance both of maintaining our rôle as a reserve currency, and also of maintaining and ensuring the long-term growth of the economy. The measures that we have taken, after a long period of inaction, may be criticised on the ground that others should have been taken. If that is the nature of the criticism, then let the Opposition say what other measures should have been taken, and let them explain why those measures were not taken earlier. This I believe to be a fair point to make to the Opposition.
In the meantime I say, with all the emphasis that I can command—

Sir C. Osborne: Sir C. Osborne rose—

Mr. Callaghan: I cannot give way now.
I want to make it clear—and I hope that I will not raise hon. Members' hackles in saying it—that there is a job of fundamental importance to be done. It is something of the greatest significance to the whole country and to its future. It is for this reason that I have taken the measures that I have, distasteful though they will be to some and painful though they will be to all. I believe that this is the way in which this country can survive and prosper.

4.21 p.m.

Mr. Reginald Maudling: The Chancellor of the Exchequer has explained very courteously and clearly the provisions of the Finance Bill, as is traditional in the Second Reading debate. A little later I shall deal with the Bill in some detail, but he will not be surprised if I start by dealing with the financial situation of the country and the very recent developments.
Of course, I agree with the right hon. Gentleman that there is an immense task to be carried out. No one has ever denied that. The establishment of an incomes policy, which hon. Members on both sides have for a long time said is very important, and the sweeping away of restrictive practices of all kinds, so that our goods, and particularly our


export goods, can move more freely, represent immense tasks of a national character which must be undertaken.
But there are also many things which the Government have done which they need not have done, and which have also done immense damage. When listening to the last part of the right hon. Gentleman's speech, about the effects of the 7 per cent. Bank Rate, I was struck by what I thought was inconsistency with what was said when my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced a 7 per cent. Bank Rate. We were not told by the then Opposition that this would virtually have no effect on investment. If the right hon. Gentleman looks at the record I think that he will find that his present assessment of the effects of a 7 per cent. Bank Rate is very different from what he and his colleagues said it would be a few years ago.
Secondly, I cannot help seeing an inconsistency between his reference to disinflation and the Government White Paper published as recently as 26th October, He is now talking in terms of the heed to exercise a deflationary pressure on the economy. He was saying, in effect, that the increased Bank Rate would be valuable in adding to the deflationary pressure on the economy. But in the White Paper of 26th October we were told:
The Government further examined the domestic economic situation. Apart from special problems of individual areas and in a limited number of industries there is no undue pressure on resources calling for action. Moreover, the Government reject any policy based on a return to stop-go economics.
It did not sound quite the same this afternoon.
I want to refer to what was said yesterday about the increase in Bank Rate. In putting some questions to the right hon. Gentleman, I said:
… is he aware that the speculative movements to which he refers, both by their nature and their timing, clearly derive from the recent actions of the Government, including, in particular, the Budget, the taxation proposals, and the inept handling of the surcharge?
I thought that that was true then, and I think that it is true now. But I certainly did not expect to have it confirmed within the hour by the Prime Minister himself.
Let us look carefully at what the Prime Minister said yesterday. It was a very important statement. He said:
The fact is, as the right hon. Gentleman recognises, that so far as the trade gap is concerned, whatever the trade gap or payments gap—whatever has been estimated as having to be met—there were reserves and borrowings more than adequate to meet this, but in the course of the past week there has been this new development arising from confidence factors.
The right hon. Gentleman meant a lack of confidence factors, because there can be no doubt—and it is right for this to be said, because it is equally important for the country to realise this as to realise anything about an incomes policy or restrictive practices—that in the last few days or in the last week—the Prime Minister referred to the last few days—there has been a collapse of confidence in the present Government's ability to handle our economic affairs. There are many reasons for this—

Mr. Shinwell: Inspired by whom?

Mr. Maudling: Inspired by the actions of the Government.

Mr. Shinwell: Tell us what you would have done.

Mr. Deputy-Speaker: Order. If the right hon. Member for Easington (Mr. Shinwell) wants to interrupt, he knows the right way to do so.

Mr. Shinwell: What is the use of going over all this ground again and again? Will the right hon. Gentleman be good enough to tell the House and the country what he would have done if he had been Chancellor.

Mr. Maudling: We would not have got into this situation. [HON. MEMBERS: "Oh."] It is quite impossible to understand the situation unless we look at its causes. I am going to refer to the causes of what the Prime Minister himself called the new development of the last few days, because that, in the words of the right hon. Gentleman, is what the Bank Rate change is designed to deal with.
The first is the nature of the Budget itself and the effect that it undoubtedly had overseas. The Chancellor said that the Opposition's complaint was that the Budget was irrelevant to the economic situation. That is not my complaint. My complaint is that the Budget and the tax


proposals will be positively damaging to the economic situation by their effect upon industrial costs and by what I believe to be an inflationary and not deflationary bias in their operation.
Secondly, damage has clearly been done to our position by the policy of exaggeration adopted by the party opposite. The Prime Minister is aware of this. Yesterday, he said:
We are dealing with a situation where what matters is not what our trade and payments position is, but what people overseas think it is."—[OFFICIAL REPORT, 23rd November, 1964; Vol. 702. c. 914–933.]
If people overseas think that our position is worse than it really is, who made them think that? [HON. MEMBERS: "YOU did."] This is extraordinary. We have been accused of underestimating the present difficulties; now we are accused of exaggerating them. The figure of £800 million—[Interruption.]

Mr. Deputy Speaker: I must ask hon. Members to refrain from interrupting from their seats.

Mr. Thomas Swain: Mr. Deputy-Speaker, will you draw the attention of the nut from Knutsford to the fact that it is he who is causing all the trouble?

Mr. Deputy-Speaker: My observation was addressed to hon. Members on both sides of the House.

Mr. Maudling: I will give one or two examples of what I am saying. The first is the reference to the figure of £800 million, when, of course, the White Paper says that the deficit, current and long-term together, is unlikely to be below £700 million and may be £800 million. Secondly, there is the capital element in this figure which has been wholly ignored. The impression is given in the Left-wing Press that it is a trade gap. Of course, about half of it is new investment overseas or the repayment of old debts. Thirdly, there are the special factors which seriously affect 1964 and which the right hon. Gentleman the Chancellor has mentioned several times in his recent speeches and statements.
These special factors have not been given very much prominence in the other speeches and attitudes of the party opposite. Fourthly, there is the fact that 1964, to which the Government have made so much reference, is nearly five-

sixths or more over. It was three-quarters over when they came to power. That three-quarters of the year 1964 had already been "taken care of ", in the Prime Minister's words.
The year 1965 will show without any further action a substantial improvement in our trade figures. The most recently published trade figures show quite clearly that before any question of the imposition of the surcharge was made imports were beginning substantially to decline. All these are reasons why the situation has been exaggerated. Then there has been the extraordinary mishandling of the import surcharge. Even The Times, which can hardly be regarded as the most enthusiastic pro-Conservative newspaper—[HON. MEMBERS: "Oh."] What a change there has been—said:
The Government's handling of its import surcharge has almost passed belief … In order to impose the surcharge Britain had to break faith with international obligations. Yet, incredible as it still seems, Whitehall made no serious attempt to smooth the path beforehand. Only now is it possible to see the true cost of this neglect.
The Chancellor said that there would have been forestalling. But it was not a question of having discussions with businessmen, but of having them with the Governments concerned. This is what the Government wholly failed to do.
Then there are the other actions by the Government affecting our overseas relations which are almost bound, in one way or another, to affect our trade adversely. There was the gratuitous reference to the Concord in the White Paper of 26th October. Why it was put in, I cannot imagine. It was bound to create offence to the French and to create difficulties in our trading relations with France.

Mr. Dick Taverne: Can the right hon. Gentleman explain why the obvious intention with which the Government are reviewing wasteful and expensive schemes is something which has lost us confidence in Britain's economy?

Mr. Maudling: That really is the point. It is perfectly reasonable for a new Government to review all expenditure, but to do that straight away in respect of a joint project with the French Government and to single out that project in this way was obviously ill conceived. The fact is that Concord sticks


out like a sore thumb. "Let's go with Labour‡"
Then there is the treatment of South Africa over the Buccaneers. The announcement is coming tomorrow. [Interruption.] There is a collapse of confidence in the British Government's handling of our affairs, and the effect on our trade with South Africa is obviously a contributory factor to the situation which we are now facing.
Finally, there was the announcement about the corporation tax and the capital gains tax, to which the right hon. Gentleman referred again today. I do not think that the Chancellor realises how much damage this announcement caused. It has virtually paralysed much of the delicately balanced investment machinery of the City of London. I know there may be some hon. Members opposite who could not care less what happened to the City in general or to the Stock Exchange in particular.
I am sure that that is another contributory factor in this lack of confidence. The Government really must understand that the financial machinery of the City of London is an essential part of the whole investment machine of this country. They must recognise—if they do not now, I cannot understand why not—that damage done to the City spreads to other markets. The damage done to the Stock Exchange is bound to make its effect felt on foreign exchange markets.

Mr. William Hamilton: On a point of order. Is it not the custom of the House, Mr. Deputy-Speaker, for right hon. or hon. Members who have an interest in outside business to declare that interest?

Mr. Deputy-Speaker (Sir Harry Legge-Bourke): The point raised by the hon. Member is not a point of order. I think that it is the custom of the House to leave it to the responsibility of hon. Members themselves to declare an interest if they have one.

Mr. Maudling: It is obviously not a question of personal interest at all. The House is perfectly aware of that. That is nonsense.
The fact is that everyone should have a real interest in the health and prosperity

of the financial centre of our country and in the invisible exports that come from the City. The fact is that nothing has made a bigger contribution to the collapse of confidence in the Government in the eyes of people abroad than the way in which the Government have treated the City of London and the—

Mr. William Warbey: Mr. William Warbey (Ashfield) rose—

Mr. Deputy-Speaker: The hon. Member must resume his seat if the right hon. Member does not give way.

Mr. Maudling: I want to put some particular points to the Chancellor about the Capital Gains Tax and the Corporation Tax. On the Capital Gains Tax, the right hon. Gentleman's assurance about securities showing a loss was helpful, but his remarks about true market value were cryptic, and there are still a number of factors which need to be made clear before rational investment decisions can be taken.
This is a question of finding the necessary finance for British industry. I see the right hon. Gentleman's point that the rate or level of the tax cannot be announced in advance, but it is the structure and method of the tax which can affect the whole structure of company finance. Its effect on individual companies will vary very much according to the structure of the tax. Insurance companies and pension funds are in extreme difficulty at the moment. Investment trusts play a big part in finding the savings that play a very considerable part in our economy. Multiple taxation either under the Capital Gains Tax or the Corporation Tax are all certainly dangers to watch. I appeal seriously to the right hon. Gentleman to do all that he can as quickly as possible to resolve doubt on these matters, which are having a serious effect on insurance funds, pension funds and investment.
I am certain that from the point of view of balance of payments and sterling this is inhibiting foreign investment in this country, because people will not invest in British equities or securities if they have this hanging over their heads. So I appeal to the right hon. Gentleman to clear up some of these ambiguities as quickly as posible in the general interest.
Now I turn to the proposals in the Bill. There are four main proposals:


Income Tax, the petrol duty, the surcharge and the incentive. We shall be examining all these matters in detail in Committee, but I want to say one or two things about each of them and to express our general view of the effects which they will have on the economy. We believe that an increase in the standard rate of Income Tax will have a bad effect on the economy. It will discourage enterprise, particularly among the managerial and technological people whom the Government want to encourage.
The effect on savings, both personal and company savings, is bound to be considerable, and the effect on investment is bound to be discouraging because the net return will be reduced by the tax charged on the profit flowing from it.
Then there is the hydrocarbon oil duty. This seems to be a very unwise type of new impost to place on industry. Something like 60 per cent., I believe, of the total yield from the hydrocarbon oil duty increase will fall on trade and industry and will be borne on the costs and prices in British industry. There are particular problems about which we shall want to hear a great deal more. There are problems of agriculture and horticulture and all the trades which are affected, and the assembly and construction industries and other industries. The new increase in duty will fall particularly heavily upon them because of the large number of transport activities which are included in their businesses.
These are particular problems which we shall wish to raise. I repeat again that we object to an increase in the petrol duty at the present time, or, indeed, at any time.

Mr. William Hamilton: That makes a change.

Mr. Maudling: I wish to refer to the surcharge. The right hon. Gentleman—

Mr. Woodrow Wyatt: Will the right hon. Gentleman give way?

Mr. Maudling: No, I cannot give way to the hon. Gentleman. I have given way enough already.
The right hon. Gentleman dealt with a number of the points, which we have in mind, but I do not think that in any case he did so satisfactorily. There are three main matters which we wish to probe. First, why it is necessary to impose a charge on goods which have to come to this country anyway, either on those in transit or on those which had actually arrived here at the time the surcharge was imposed? Why is it right to impose a surcharge on essential materials which cannot be manufactured in this country? According to a letter which I received today it will be imposed on ammonium sulphate nitrate which, I am told, is an essential raw material for the manufacture of new concentrated fertilisers. In the range of chemicals there must be a very wide number of products which are essential but which cannot be supplied from domestic sources.
Why must the surcharge be 15 per cent.? Why not, as in the case of Canada, have a differential rate for different products? I do not think that the Chancellor answered satisfactorily any of those points. I cannot accept his argument that a duty must be imposed on goods which will have to come to this country anyway. The right hon. Gentleman said that he must do it, that it was always done, but I do not accept that. If the object of the surcharge is to stop things coming into the country—I cannot imagine that there can be any other object—what is the sense in applying it to things which would have come in any case?
What is the sense in applying it to things which cannot be made here? I do not follow the logic of the right hon. Gentleman's argument that these products will be protected. The whole point of the surcharge is temporary protection, and, if that be the object the task is to try to operate on things where a cutback can be made and not, by definition, on things where a cutback cannot be made at all. The answers given by the right hon. Gentleman this afternoon were neither convincing nor satisfactory.
On the export incentive, we doubt whether it will be adequate to work in practice, and whether, in view of the scale involved—it is difficult as we know to evolve a scheme consistent with our international obligations—the expenditure of £75 million will be justified by


the amount of additional exports which will result. These and other related questions we shall want to probe in Committee.
I wish to return to the overall picture of the Budget and to say why, in my view, it is a Budget of an inflationary character which is bound to put up costs and prices and create greater difficulties for the economy. I cannot accept the calculation of the right hon. Gentleman about its disinflationary effect. It is true that when we add the yield expected from the import surcharge and the petrol tax together it comes to something like, with destocking, the amount of imported goods prevented by the surcharge from coming in. That means that the Budget measures will offset the increased inflation arising from the operations of the surcharge. This will have the effect of balancing the equation. It is not disinflationary. It safeguards the economy against the inflation which would have arisen by the operation of the surcharge.
The great bulk of the expenditure involved is, however, new expenditure. My point is that the expenditure will issue immediately into effect as the total amount distributed in social benefits which will be spent at once and to a fairly high proportion on imported goods. This will add about £340 million to £350 million to the demand side of our economy.
The increased tax which is supposed to match this will not do so. The large increase in the amount for stamps paid by employers will be offset against Income Tax and to that extent the total addition collected from industry will be reduced. A great deal of the additional taxation Income Tax or whatever falls on companies—will not come out of spending, but out of saving. Therefore, it cannot be possible for the disinflationary effects of the new tax to be anything like a balance for the automatic and inevitable inflationary effect of the new expenditure. So I say seriously that this calculation, which I believe to be one which has been widely made in other quarters, is right. I believe that the Budget is inflationary. I believe that it will damage our economy and for that reason we object to this Finance Bill.

4.45 p.m.

Mr. William Hamling: I ask the customary indulgence of hon. Members on this the first occasion that I rise to address the House. May I, in advance, ask the indulgence of the House for any controversial points which I may introduce, though if I do I hope that they will be expressed in fair terms.
May I refer to some of the remarks of the right hon. Member for Barnet (Mr. Maudling), who was asked very specific questions by hon. Members on this side of the House. The right hon. Gentleman made two brief references, one to incomes policy and one to restrictive practices, and spent the rest of his speech attacking the policy of Her Majesty's Government. Already this year the right hon. Gentleman has had an opportunity to stand at the Treasury Dispatch Box and present a Budget. In April, he had an opportunity to face the problems which we are facing today. Because of his refusal to face them then, the problems today are immeasurably greater.
The right hon. Gentleman said that to some extent we had exaggerated the balance of payments problem and that we had spoken of a figure of £800 million. During the last election I never put the figure any higher than £400 million for this year. We recall that in 1961 the deficit on current payments was £264 million. That was quite a different story, even from £700 million, and when one thinks of the emergency measures taken by right hon. and hon. Gentlemen opposite in that year one wonders what they would have had to do were they on these benches today and facing the balance of payments problem that we inherited from them.
During the Gracious Speech we heard contradictory voices on this question. We heard the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) pleading for a high wage economy. We also know the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). I wonder whether they will get together and decide what incomes policy they wish to recommend. We heard the hon. Member for Louth (Sir C. Osborne), who, during his speech in the debate on the Address, referred back to 1950 and pleaded for a return to the policies


of the late Sir Stafford Cripps. That was 13 years of Toryism ago. It was 16 Budgets ago. It was six Chancellors ago. These are the years that the locust has eaten. We heard the hon. Member for Louth pleading for a return to the Labour Party's policies of before 1950. What has the party opposite been doing during the intervening years?
I suppose that it is inevitable that in this debate we shall have a rehash of one or two Budget speeches. Why are we faced with this Finance Bill today'? I suggest that it is because right hon. and hon. Members opposite delayed the election for 12 months. The balance of payments problem has been with us for a long time. During the election we were told that it would be unpatriotic to refer to it. My right hon. Friend the Prime Minister was told that he was talking the nation into a crisis. We know this afternoon who has been talking the nation into a crisis during the last week—those Members on the benches opposite. I suggest that it is some of the "de Gaullist deputies" opposite who paint a black picture of the country abroad.
This afternoon concern has been expressed for E.F.T.A. This is new. Was any concern for E.F.T.A. shown in 1962 and 1963, when people talked about entering the Common Market? The facts are that the problem goes back to that year. Our difficulties go back to the fact that right hon. and hon. Members opposite failed to carry out their policy of entering the Common Market. Ever since, they have been left with a vacuum in economic policies: they have not known what to do. They wanted to hold an election in 1963 in a blaze of glory after entering the Common Market. After they were kicked in the teeth by de Gaulle, what could they do but hang on, hiding the truth from the electorate, because they knew very well that, if the truth were declared, they would go down in disaster? They have left us to shoulder the burden.
We may ask what the right hon. Member for Barnet would have proposed to the House if he had stood at the Dispatch Box today.

Sir Douglas Glover: On a point of order.

Hon. Members: Sit down.

Sir D. Glover: The tradition of the House, which the House observes with great courtesy, is that maiden speeches—

Hon. Members: —are not interrupted.

Sir D. Glover: —are non-controversial [Interruption.]

Mr. Deputy-Speaker (Sir Harry Legge-Bourke): Order. I would ask the House, when I have been called upon to give a Ruling, at least to give me an opportunity to make it. May I say, first, that I appreciate that when an hon. Member is making a maiden speech it is the custom of the House to give him a quiet hearing. I would ask hon. Members, as I am on my feet now, to recognise that a very large number of Members wish to speak in the debate. I therefore appeal to the House as a whole not to overload the atmosphere with too much surcharge of indignation.

Sir Peter Roberts: Further to that point of order. Is it not a fact that the reason why courtesy is extended to a maiden speaker is that the tradition was that maiden speeches were not controversial? If that is correct, we are quite prepared, I am sure, to give the hon. Gentleman a courteous hearing. [Interruption.] Mr. Deputy-Speaker, may I ask for your protection whilst I make this point of order? The hon. Member for Nelson and Colne (Mr. Sydney Silverman) is shouting.

Mr. Deputy-Speaker: Order. I would ask hon. Members, when a point of order is being put to the Chair—

Hon. Members: It is not a point of order.

Mr. Deputy-Speaker: Order. I would ask hon. Members, when a point of order is being put to the Chair, to enable the Chair to hear the point of order, and I would ask hon. Members putting points of order not to indulge in argument in the middle of a point of order.

Sir P. Roberts: I was provoked. I apologise, Mr. Deputy-Speaker. The point of order is this. In your Ruling you said that it was the practice to extend courtesy to maiden speakers. I was saying that that was because maiden speakers did not indulge in controversial matter.


I suggest to you, Mr. Deputy-Speaker, that if a maiden speaker makes controversial statements it is in order to intervene and interrupt.

Mr. Deputy-Speaker: It is true that the whole question of giving a quiet hearing to an hon. Member making a maiden speech does not raise a point of order at all. I would say to the hon. Member for Woolwich, West (Mr. Hamling) that the more provocative he is the less likely he is to have a quiet hearing.

Mr. Hamling: I was asking the right hon. Member for Barnet some questions. Perhaps his right hon. Friend who is to wind up the debate will try to answer them. Would the Tories have increased taxation? Would they have raised the Bank Rate to 7 per cent., as they did in 1961? Would they have increased the duty on petrol, as they did after the 1951 General Election and as they did after the 1955 Election? Would they have imposed a wage freeze, as they did in 1961? Would they have increased charges on the hospital section of the Health Service, as were promised before the election? Those are questions to which the House deserves, and is entitled to have, answers.
The Bill is not one of my right hon. Friend's choosing. It is not one of our choosing. This is the legacy of 13 years of Tory government.

4.56 p.m.

Mr. Hector Monro: I rise with great trepidation in a highly charged atmosphere to address the House for the first time, but I am encouraged by the traditional friendliness and appreciation which are shown to maiden speakers and which have certainly been evident to me during the past few weeks.
I come from the County of Dumfries. Perhaps here I may strike my only controversial note by saying how happy I am that it is on the right side of the Scottish Border. The southern boundary is the Solway Firth. I feel that the House may come to know this stretch of water far better if the Salway Barrage scheme is fully investigated and, if found practicable, brought into being. It is a tremendous concept of far-reaching consequence to southern Scotland and northern England. I hope

that the Government will consider the possibilities with the enthusiasm they deserve.
The County of Dumfries has many and diverse industries, nearly all of which are affected by the Finance Bill. It is on these problems that I want to touch for a few moments. In the development district of Upper Nithsdale, which includes Sanquhar and Kirconnel, there is a serious unemployment position. At present it is at the rate of 10·6 per cent.—a very high figure indeed. This has arisen because the coal mines of Sanquhar are worked out and closed. That is not the fault of the National Coal Board or of any Government, but it is unfortunately a fact.
Early this year a new advance factory was completed and now it is let, but even in full production it may absorb only about 80 people. A second factory is urgently required. I hope it is not too late for the President of the Board of Trade to site another one in Upper Nithsdale. In a comparatively remote part of Scotland, the extra tax on fuel will not encourage industrialists to come to the area. London is 360 miles away and Glasgow 54. To London a round trip by lorry will cost an extra 35s. in tax. May I go so far as to hope that the Government will give an additional incentive to firms to come to remote areas where transport costs are disproportionately high and will be even higher under the Bill.
It is also true that these areas of Scotland requiring urgent industrial development will be affected to a considerable extent by yesterday's increase in the Bank Rate. I hope that it will be reduced as soon as possible.
The fuel tax has, of course, affected agriculture, and as a farmer I know this. The movement of livestock, and particularly the collection of milk, costs more and will have to be paid for by the producer, Milk producers are having a difficult period and many are leaving the industry. The increase in tax can only accelerate this trend and may cause unemployment in the creameries and milk-processing factories where there is a shortage of milk. The delivery of fertilisers and feedingstuffs will also cost more, because the vast bulk of these come by road, often directly from the factory to the


farm. I trust that the effect of the fuel tax will be taken fully into account in the coming Price Review.
We must not forget also that in many cases the only means of transport for the agricultural worker, his wife and family in the more remote districts to shop and enjoy recreation is in their own motor car. They will not have a rebate scheme in the manner of a non-existent rural bus service but their need is just as great and usually far greater.
I should like to know just how much the tax rebate will be for rural bus services. The finances of companies, often one-man companies, running these services are in a precarious state. Anything less than a 100 per cent. rebate of the tax may well be a death blow to them. This will certainly fall most heavily on the older folk who have no motor cars of their own.
There is also the effect of fuel cost on tourism. This is a fast developing industry in Scotland. Dumfries and Galloway hope to welcome an increasing share of visitors, and with the advance of the motorways northwards and the chronic overcrowding in the Lake District the attraction of weekend visitors from England to southern Scotland is now most important. It should develop rapidly to the advantage of the economy in my district. I do not wish to see this development retarded by increasing fuel costs. Incidentally, how unfortunate it is that at the gateway to Scotland at Gretna Green we have the unusual State Licensing District which virtually prevents the building of new hotels for tourists. This was introduced during the First World War to restrain over-indulgent munition workers, but it remains today to provoke residents, tourists and runaway couples alike.
I should also like to mention the effect of the increased fuel tax on aviation, and particularly on private flying. We are living in an age of technical advance, and we all know that time is money. We ought to be encouraging the use of aircraft for the rapid transport of businessmen about their work. This is particularly important to the very remote areas which are not served by regular airlines. The extra tax on fuel, which I am informed by people

at my nearest aerodrome is payable by owners of private aircraft, will slow down expansion in this direction.
On a light aeroplane such as I sometimes fly, the cost per hour has gone up by 5s. to cover the tax alone, and for the larger executive-type aircraft the extra cost is at least 10s. an hour. This may just tilt the scale against the use of this type of aircraft and thus affect not only business but the aircraft industry. We ought to remind ourselves that, although the weather has much to do with it, we are years behind the United States and Canada in the timesaving use of aircraft. I suggest to the Government that they should increase the rebate of fuel tax to flying clubs and groups by 6d. per gallon to offset the new tax.
Now, a brief word about the surcharge. Dumfries and Annan have an important hosiery industry. Langholm has mills manufacturing tweeds of a quality second to none. They are all concerned about the effect of the surcharge on their exports to Europe. I have seen letters from Continental importers hinting at the cancellation of orders if their countries impose a surcharge similar to ours. Other importers are demanding that the 1½ per cent. export incentive be deducted from delivery prices. I hope that the surcharge will be removed as soon as possible.
I hope that the general financial position taken up by the Government will not have a detrimental effect on the future of the Chapelcross atomic energy power station. It has a fine site with ample room, ample services and an ample labour force to build and staff the new fast-breeder reactor which I believe is under consideration. I urge the Government to give the area the opportunity. I have pointed out several cases where the Finance Bill will be against the interests of rural areas. I have suggested one or two alternatives. I hope that the Government will give them consideration and later perhaps translate them into action. At a later date I hope to speak on local government, in which I have special interest. I thank the House for the consideration which it has shown to me today.

5.6 p.m.

Mr. A. E. P. Duffy: The hon. Member for Dumfries (Mr. Monro) was quite right when he said that having to make his maiden speech in such a highly charged atmosphere penalised him further on an already nerve-racking occasion. However, I think hon. Members will agree with me that, despite this, the hon. Member acquitted himself with distinction. He spoke fluently and confidently, and all he had to say was not merely relevant to the subject but thoughtful. I am sure hon. Members will agree that we look forward to hearing him again in this Chamber.
Perhaps because of the atmosphere in which he rose to start his maiden speech, I did not hear the hon. Member make any reference to the previous speaker. I should, therefore, like to take the opportunity of saying how much I enjoyed the maiden speech of my hon. Friend the Member for Woolwich, West (Mr. Hamling). I think hon. Members will agree that it was a considerable performance. He, equally, spoke with confidence, if a little warmly, and with equal relevance. I am sure that we shall look forward to hearing him again in the Chamber.
Before dealing with the Finance Bill, I should like to refer briefly to the right hon. Member for Barnet (Mr. Maudling). I am sorry that he is not in his place and had I been able to get in touch with him I would have told him that I intended to refer to him. I remember a debate on the Budget statement a fortnight ago when my hon. Friend the Member for Penistone (Mr. Mendelson) had cause to query seriously certain statements made by the right hon. Gentleman. My hon. Friend accused the right hon. Gentleman, among other things, of being highly tendentious in his selection of authorities. As a result of that, I listened all the more carefully to what the right hon. Gentleman had to say today. The right hon. Gentleman was not merely tendentious this afternoon, he was downright dishonest. [HON. MEMBERS: "Oh."] It is not good enough that a man who filled the position which the right hon. Gentleman filled—

Mr. Deputy-Speaker (Sir Harry Legge-Bourke): Order. I thought I heard the hon. Member say that the right hon.

Member for Barnet (Mr. Maudling) had been dishonest. That is definitely out of order and the hon. Member must withdraw it.

Mr. Duffy: If it is out of order I withdraw it, and say that the right hon. Member for Barnet was even more tendentious today than he was said to be by my hon. Friend the Member for Penistone a fortnight ago. It is not good enough for the right hon. Gentleman, who filled the position which he filled until recently, to take a position in the City and then accuse hon. Members on this side of the House of not having sufficient regard for the mechanism of the City and its confidence. It is not good enough, without at the same time declaring his interest, to talk as if we did not care for the City. Of course we do. It is because we know what happens in the City that we knew of his appointment and we expected him to declare his interest, and he did not

Mr. Edward du Cann: My right hon. Friend the Member for Barnet (Mr. Maudling) has had to absent himself from the Chamber for a few moments. I dare say that he will be back shortly. Do I understand the hon. Member to say that he did not give my right hon. Friend notice of this personal attack?

Mr. Duffy: I said that I could not get in touch with him. I was notified that I was to speak immediately, but I left the Chamber and tried to get in touch with him.
I do not think that it is good enough—to put it as strongly as I can—for the right hon. Gentleman to confine his analysis of our economic difficulties to the last few days without looking back over the last few months, much less without taking up the challenge of my right hon. Friend the Chancellor and saying what he would have done had he been in office. At no time in his speech did he say what he would have done in this situation.
I also noticed that the right hon. Gentleman spoke of some inconsistency on the Government Benches between what we are saying now and what we said about the possible effects of the 7 per cent. Bank Rate on investment in 1961 when the Bank Rate was last raised to this level. What he did not point out was that the measures of his right


hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) were accompanied by a credit squeeze. There is an entirely different situation today. He knows that there is a vital difference. Nevertheless, he made no allowance for it, and repeat that that is not good enough.
On the other hand, I believe seriously—and I intend to defend these beliefs—that my right hon. Friend's Autumn Budget is right socially, economically and technically. It is right socially because the Finance Bill sets out to find money for welfare benefits for the old, the neglect of whom during the 1950's has been one of the most disagreeable features of our society.
The Budget is right economically because it eases the balance of payments crisis by discouraging imports and encouraging exports. It is right technically because it is deflationary to an extent which I must confess I did not at first quite understand. The extent is £220 million, a figure which I do not believe any of the pundits during the last few days even guessed at. This is appropriate, given the surcharges. It is appropriate because it more than fills the gap between the withdrawal of supply and the withdrawal of purchasing power.
But I hope that the surcharges will be temporary. One can recognise the need for them but also recognise, at the same time, that they are likely to lessen the stimulus of competition in our economy. They will encourage manufacturers to concentrate on the home market. They will increase industrial costs when the tendency for such costs will be upwards anyway. They will induce flabbiness in our economy. One therefore hopes that these surcharges will be temporary. On the other hand, one hopes that they will be associated without delay with an attack on monopolies, mergers and price rings as well as on the restrictive practices about which hon. Members opposite were so concerned when the right hon. Member for Barnet referred to them.
I think that the Budget is right to encourage exports because prospects for exports are bright. Despite the changing trade conditions and the fact that markets are becoming savagely competitive, the prospects for exports are good.

Our comparative cost position is not unfavourable, and the inability of the late Government to exploit this position was, in my view, their most striking failure. The United States apart, wage rates have increased much more rapidly in other industrial countries, especially in Western Europe, than in the United Kingdom, as the labour supply everywhere in Europe has dried up. Western European countries, in particular, are experiencing full employment and are beginning to look to the possibilities of an incomes policy in their countries. In this year Britain has been admirably placed to steal a march on the Western European countries and has failed to do so.
Exports are therefore the key, and I am glad to note that attention to them occupies a central place in the Finance Bill. I was glad to hear my right hon. Friend say that he and his colleagues will neglect no opportunity of encouraging exports. I am glad to note that such encouragement will be associated with price scrutiny through the Price Review Body. I set great store by the Ministry of Economic Affairs and by the Ministry of Technology. I see as their main task what must be the greatest hope of this country—the long-term hope of stimulating the underlying growth of our economy.
There are three sets of conditions for such growth. The first is the over-riding need in the present situation to restore confidence, especially abroad, and this has been done by the higher Bank Rate. The second condition is to stimulate investment. The third is to try to stabilise prices—and we are all agreed that this can best be done through an incomes policy.
It has been rightly pointed out that, unhappily, the measures to restore confidence and the need for greater investment must in the short term be in conflict, and the higher Bank Rate is, unhappily, also an obstacle to both exports and economic growth. But in view of the capital outflow this year, which is responsible for perhaps half of the £800 million deficit which we expect at the end of this year, it was inevitable that some such action would have to be taken as was taken yesterday.
A body of opinion holds the view that this action should have been taken


at least a month earlier. I think that it is to the Chancellor's credit that he delayed taking this action. Certainly, as my hon. Friend the Member for Woolwich, West said, it does not lie in the mouths of Tory Members to chastise the Government for not taking action sooner, because they had ample opportunity to take such action months ago. My right hon. Friend the Chancellor was right to delay action because the global control of demand in our economy is not appropriate to our difficulties. What are needed are selective stimuli in the economy, for example—regional development. And its expansion calls for capital formation, which in turn requires a high level of investment—and this, again, calls for more saving.
Unfortunately, the higher Bank Rate is likely to have just the opposite effect. It was rightly said by the right hon. Member for Barnet that the Budget has had the additional effect of transferring income from potential savers to potential spenders. This creates an additional need by the Chancellor to increase private savings and to stimulate Government savings. But he was right to delay to the last possible moment anything which might have had an opposite effect. I know that fixed investment is up in the present year on last year, but it is up much more in the public sector than in the private sector. It is up by 20 per cent. in the public sector and only by 10 per cent. in the private sector. I do not regard this situation as satisfactory. We must have higher investment, and this means that we must have more savings.
It may be argued that savings have remained high, but, expressed as a percentage of personal disposable income, they seem to have been on a plateau since 1961, and I hope that the Chancellor will do all that he can to stimulate savings. I hope that he will seek methods a good deal more novel than any that the late Government were prepared to consider. I do not think that the National Development Bond, if it is still on the stocks, can be regarded as the final answer. I want to see a State unit trust and a national equity. I want to see ordinary people, for whom anything that smacks of high-level finance still has terrors, taking part in this saving.
There are new layers of potential savings being brought into existence nearly every year in our affluent society, and at the moment they are not being tapped. The Government are admirably placed to encourage these people to start saving, and I want the Government to exploit every possible opportunity, no matter how novel, of increasing the number of savers in our society in order to get the higher investment and the underlying growth of our economy which I think hon. Members in all parts of the House agree is the long-term answer to our problems.
The Chancellor was right to emphasise the need to stabilise prices and to get an incomes policy, and it is to that that I want to finally address myself. I think we are all agreed that it is essential to have an incomes policy to keep costs competitive, but there are two conditions which cannot be repeated often enough. One is that an incomes policy must be established on just grounds, and another is that our policy must facilitate rather than hinder productivity. There is an urgent need, of course, for agreement between trade unions, employers and the Government to limit the rate of increase in wages and profits to a level compatible with growth and output and long-term price stability.
The Budget makes a start at establishing the right climate of opinion, and, therefore, it is not irrelevant to the present situation. But any agreement must avoid keeping wages below a competitive level and thus stimulating excessive demand for labour and higher profits. In other words, such an incomes policy and such an agreement as the Government may arrive at must not be at the expense of wages but must be—I say this not emotionally but on perfectly defensible grounds—on the grounds of efficiency and the future health of our economy. I emphasise that we must not arrive at an incomes policy which is at the expense of wages.
The persistence with which we run into shortages of labour, as well as the wage drift, which has not been mentioned in the debate on the Budget statement or so far in this debate, could prove to be the Achille's Heel of an incomes policy. The persistence with which we run into shortage of labour in wages terms when our economy starts


to move is due to our inherent inability to use labour effectively. We still do not know how to put labour to the best use in our economy. Moreover, conditions of artificially low wages and high profits would keep inefficient managements in business. Our country cannot afford inefficient business men and low wages, riot merely on grounds of equity, social policy or even demand, but also on the ground of efficiency, especially if we are to speed up automation, and I hope that the Chancellor is already thinking about new ways of encouraging and providing more incentives for automation.
Because I want to take a balanced view, I think we need a fresh approach not merely on wages—I am arguing for a high-wage economy—but also on profits. So I welcome the Chancellor's announcement in this connection in the Budget statement. There is a need to weed out business men. Consequently, I welcome the Corporation Tax. I believe that if it is properly framed it will show trade unionists that a larger share of the national cake does not go to profits compared with wages and salaries. I can readily see that a Corporation Tax can play a positive role in an incomes policy, but there will be a real temptation to draw up a Corporation Tax that will subject distributed profits to higher tax.
This would help the slowly growing company which can satisfy its capital requirements entirely from its own resources but would penalise the rapidly growing company which has more capital than it needs. It would induce those companies whose capital needs are smaller than their resources to retain the profits for which they have no use. But, whatever the difficulties—I have indicated one or two of them on the side of both labour and capital—the search for an incomes policy must be persevered with.
Judged by this yardstick, the Budget has made an essential contribution. Also, the Budget recognises in its social aspects that an incomes policy, to be successful, must be all-embracing and that the national product must be distributed on terms a good deal more equitable than any that we have known during the past 13 years.

5.25 p.m.

The Marquess of Hamilton: I succeed a man who I understand was both respected and liked on both sides of this House. I have the honour of representing the most westwardly and one of the most beautiful constituencies. It is predominantly an agricultural constituency comprising small farms. Later in my speech, I intend to refer to the economic problems facing the small farmer at the present time.
There are certain provisions in the Bill which could well extenuate our existing problems in Northern Ireland. So, if I should appear to be unduly parochial in my maiden speech, I would ask for the indulgence of the House. However, I feel that I must remind the House of our pressing problems as well as commenting on some of the provisions in the Bill which have caused considerable alarm and concern in Northern Ireland.
Unhappily, one label which has become attached to Ulster is that it suffers from consistently high unemployment and has done so for far too long. Yet the high percentage of Ulster's unemployment gives a false picture of both the economy and the industrial progress of the province. Few realise that through redundancy in our traditional industries 100,000 have been forced into the labour market since 1945.
To counteract the decline in employment in our basic industries, the Northern Ireland Government have succeeded in sponsoring 178 new firms, providing 52,000 new jobs, since 1945. In fact, 25 per cent. of those employed in industry are now working in factories built in Ulster since 1945. However, the most satisfactory development is that the majority of those firms have expanded, and several have doubled their original production. This proves beyond doubt the adaptability of the Ulster worker and also the feasibility of profitable production in Ulster.
We have for the first time a diversification of industry. In fact, Ulster today is one of the most widely diversified industrial communities in Western Europe, including a high concentration of man-made fibre groups, such as


British Enkalon, I.C.I., Courtaulds, Chemstrand and du Pont. The application of the 15 per cent. import surcharge on essential raw materials in the man-made fibe industry, which are unobtainable from any United Kingdom source, could well have profound effects on this vital and rapidly expanding industry.
In spite of the success of our industrial development, many problems persist. For the majority of the new industries employ a relatively low labour force owing to the high degree of automation. There is still a continuous decline in employment in our traditional industries, and as new jobs are being created, others cease to exist. To coin a well-known phrase, we are having to run very fast in order to keep standing still. This is the crux of our unemployment problem. Our other problems include an almost total lack of raw materials, high freight rates and remoteness from our main markets. The Irish Channel has been described as not only a psychological barrier in our bid to attract new industry, but also a highly expensive one. The Ulster industrialist can only overcome this disadvantage by being that much more efficient than his competitor on this side of the Irish Sea. Any increase in transport costs will inevitably weigh heavily on industrialists in Northern Ireland. It is also true to say that employers and employees are less able to afford the increase in National Insurance contributions.
The effectiveness of the methods of attracting new industries by the Northern Ireland Government is being emulated by an increasing number of countries. One major query at the present time is whether the severe competition for new industries from other development areas in the United Kingdom will slow down our industrial development. I should like an assurance from the Minister that Northern Ireland will remain at the top of the priority list when diverting new enterprises away from congested areas. However, to achieve a major break-through in our unemployment, we need not only the sympathy but also the action of the Government. What we do not want is action by the Government which will further our existing problems.
There is no doubt that a 2 per cent. rise in the Bank Rate will hit Northern Ireland harder than other areas. For the impact of shocks to the British economy tends to increase rather than decrease with distance from this City. Without wishing to be controversial, I should like to refer to a statement made in Belfast yesterday by the Northern Ireland Minister of Commerce:
Measures of this kind, which are designed to take the heat off economy, have a serious effect on activity, and therefore on employment in Northern Ireland.
This is the second blow to industrial expansion within the last month, for a 15 per cent. import surcharge on machinery will deter the foreign manufacturer from choosing Ulster as an industrial base.
It would be controversial if I argued the evil effects of the rise in the petrol duty upon our economy, both industrial and agricultural. I shall content myself by saying that I believe that this tax will have very profound effects, and I shall leave the controversial argument to a later stage in the Bill.
Although we are not a wealthy part of the United Kingdom, we in no way want, or expect, to be treated as a poor relation—far from it. We want to be given the opportunity of playing a vital rôle in the economic expansion of the United Kingdom. Northern Ireland is a growth area and to prove my point industrial production rose by 38 per cent. between 1954 and 1963 compared with 24 per cent. for the United Kingdom as a whole. It is now an accepted fact that if we are to have real prosperity in the United Kingdom then every area and section of the community must have a fair share in it. However, the small farmer in Northern Ireland is definitely not getting his fair share of in- creased prosperity. His problem is acute. It will grow more so until it is properly tackled. The naked truth of the situation is that whilst incomes in general continue to rise, the small farmer is becoming poorer through falling prices and rising costs.
In Ulster the small farmer is efficient. He works extremely hard to survive and to maintain his independence. I fully appreciate that farm structure, like all our economic and social institutions, must be constantly modified in order to keep abreast of the economic situation.


However, I am convinced that the small farmer alas still a vital role to play in the future of this industry, providing he receives a fair deal from the Government.
The right hon. Gentleman the Minister of Agriculture has said that the problem of how best to help the small farmer and improve farm structure will be among the items which he will be discussing with all sides of the industry during the coming months.
I am glad to note his assurance that the extra cost imposed on Ulster farmers by the increased petrol tax, which he modestly put at £200,000 a year, will be taken into account at the next Annual Price Review, and that close touch will be maintained between the Northern Ireland Government and the Ulster Farmers' Union in the development of the Government's agricultural policy.
I should like to thank hon. Members for the courtesy, tolerance and kindness which they have shown me this evening.

5.34 p.m.

Mr. Harry Howarth: In rising to address the House for the first time, I am aware of the indulgence which right hon. and hon. Members usually show to those of us who have recently arrived here and who are, therefore, in need of such indulgence on the occasion of a maiden speech. I may say that I feel even more in need of that indulgence after this afternoon's excitement.
I have received the usual advice from more experienced hon. Members as to what one ought to say or ought not to say in a maiden speech. I shall endeavour to conform to the normal practice of the House, and I hope that the indulgence which has already been extended to other  may be extended to me.
Perhaps I  to make  thing clear from the start. The  that I have chosen to speak on such an important Measure as the Finance Bill does not mean that I am a financial wizard, but it seems to me to be as good an opportunity as any to refer to industry in my constituency and to a Clause in the Bill which affects that industry.
I have the privilege of representing the constituency of Wellingborough, which is situated in the very pleasant county of Northamptonshire. The urban district of Wellingborough is but part of the constituency, which also has within its boundaries the urban districts of Rush-den, Irthlingborough and Raunds, and the borough of Higham Ferrers which, with a population of under 4,000 is surely one of the smallest boroughs in the country. It is, however, of great historical interest and received its charter over 700 years ago, in 1251. There are also many villages which comprise the rural district of Wellingborough included in the boundaries of my constituency, and I count myself very fortunate indeed to represent such an area. The people of my constituency are kind, generous and hardworking, and at the risk of being controversial, I must say that I have found a friendliness which, at one time, I did not expect to find outside my native Lancashire.
One cannot speak of the Wellingborough constituency without referring to the close attention that its Members of Parliament have shown to its problems over the years. I hope that I shall be forgiven by those who served the constituency so well, but who are unknown to me personally, if I make reference only to my two immediate predecessors. Mr. George Lindgren, as he then was, who was the Member from 1945 to 1959, is a personal friend of mine. He is remembered with affection in the constituency, and it is with great satisfaction that I and my constituents see that he is carrying on his work in another place, not now just as a Member, but as Joint Parliamentary Secretary to the Ministry of Transport, an appointment which I welcome because both he and I were railway clerks and I recognise his great knowledge in the field of transport and wish him well in the problems that he has to face.
Mr. Michael Hamilton was Member for Wellingborough from 1959 until the last election. He was a Whip in the Conservative Government, but he must have done his job in an efficient manner because he was well liked by all who knew him. I remind the House that I am here with a majority of only 47, so hon. Members will appreciate that Mr. Hamilton and I fought hard during the election campaign. But Mr. Hamilton was a fair opponent


and, despite our political differences of opinion, I have a great regard for him.
I want to refer to a major industry in the constituency, but perhaps I may be permitted to refer, first, to the fact that arrangements have been made, in conjunction with the L.C.C., for Wellingborough to become an overspill area for London. Already, some firms have taken up sites and homes have been or are being built for those who want to move with their present employers. The other local authorities in my constituency are also anxious to get new industries and I hope that many more inquiries will be made of the local authorities for sites for development.
If I can encourage others who want to move to go to this delightful part of the country, I think I can best do so by saying that I know that they will find the friendliness and helpfulness of the people of Northamptonshire extended to them as they have been to me. Northamptonshire is well known for its boots and shoes and a great number of my constituents work in the many boot and shoe factories in the area. They are contributing in no small way to the economy, not only in the home market but in export markets as well.
I must say, however, that those who work in this great industry are concerned at the level of Purchase Tax which is applied to their products and they are hoping that the tax can be removed altogether or at least reduced at an early date.
Much concern is also being shown about the 15 per cent. import surcharge on the finished or dressed leathers used in the industry and to which my right hon. Friend the Chancellor of the Exchequer referred today. One quarter of all the supplies of dressed leathers is imported and in relation to certain international agreements, such as the Stockholm Convention, dressed leathers are accepted as a raw material in respect of the footwear industry, although they do not appear on the list of basic raw materials.
It is impossible to replace the imported dressed leathers supplies from domestic sources, so, in any case, imports will have to continue. My information is that 70 per cent. of this leather comes from sterling area countries and is

used in the lower ranges of footwear, which will, therefore, bear the brunt of any price increases which may occur.
The industry is grateful to my right hon. Friend for the revision of the exemptions which he recently announced and which go a long way towards meeting its case for special consideration. I hope that he will have another look at the position regarding dressed leathers to see whether further exemptions can be made. Having said that, I support the Government in the steps they are taking to improve the balance of payments position and my only criticism, if criticism it be, is that the surcharge falls hard on the major industry in my constitutency.
It is obviously important, therefore, that I should make this plea on behalf of my constituents who are working hard to keep the country literally on its feet. I am grateful for the patience that right hon. and hon. Members have shown in listening to me and for the indulgence which has been extended to me.

5.44 p.m.

Mr. Russell Johnston: I rise with considerable humility to make my maiden speech. I think that new Members will agree that merely to be in this House is in itself a chastening experience without having to speak at all. We stand in the presence of men and women of very considerable experience and ability. We have the privilege of listening to them distilling their experience into words, sometimes with electrifying effect—for example the speech of the hon. Member for Ebbw Vale (Mr. Michael Foot) last week in the debate on the Commonwealth Immigrants Act. I found his speech stimulating and exciting. We find these things on both sides of the House, irrespective of the views expressed. I thank right hon. and hon. Members on both sides for the experiences which, in a very short time, they have given me.
I represent the constituency of Inverness and I say this with great pride. It is the largest constituency in the United Kingdom, stretching from the Borough of Inverness itself across some 4,000 square miles to Skye and the small isles of the West Coast. Within its very wide boundaries live about 50,000 electors who experience the stresses and strains, the difficulties and the challenges endemic to any Highland constituency.
Not merely do we face the problems customarily associated with crofting, with agriculture, with industry, with tourism and with fishing, but our alleged remoteness, exacerbated by the organisation of our transport system, creates, as it were, both an export and an import surcharge of difficulty upon problems which are themselves intrinsically stubborn of resolution.
Allied to these difficulties of communication we have, I am afraid, become almost inured to a very long heritage of neglect which is reflected in our continuing depopulation and which tends to make us innately suspicious of the black-bowlered gentlemen from St. Andrew's House and Whitehall armed with their dangerous weapons in the form of umbrellas. It also makes us sadly suspicious of the well intended platitudes of Southern reformers.
We also suffer from an undue concentration of land ownership. The "lairds of solitude", to which my hon. Friend the Member for Caithness and Sutherland (Mr. George Y. Mackie) made reference in his maiden speech, seem to us too often either to seek to smother all progress or to be able to make undue profit out of the progressive efforts of other people. In this connection, we on this bench await with interest Government implementation of the idea of a Highland development authority which we have for so long advocated.
Custom dictates, I am led to believe, despite everything that one has heard, that a maiden speech should be non-controversial. That is all very well for hon. Members opposite and hon. Members behind me, but it is more difficult for a Liberal to make a non-controversial speech. After all, we represent a party which hon. Members on both sides would surrender safe seats gladly to destroy, and we have continued in existence because we have adhered to principle and have refused to compromise on it. I hope, therefore, that I will be forgiven if I cross the bar of controversy on this occasion.
With this in mind, I want to make a few comments on the Budget.
The right hon. Gentlemen opposite have panicked into further restrictions.
And
… when the call has been for expansion, more production, more investment and more

exports the government have met every crisis with panic measures and restrictions which hold down production and hold back investment, so that when the next crisis came the nation's economic base was too narrow and thin to sustain the burdens and strains which were put on it."—[OFFICIAL REPORT, 18th July, 1961; Vol. 644, c. 1179.]
That was a quotation from the Prime Minister in castigating the then Government for raising the Bank Rate to 7 per cent. in 1961. I fancy that quite a number of hon. Members opposite will have to eat quite a few words even if they are not particularly hungry.
While we Liberals would not wish to condemn the Government for action forced upon them by the ineptitude of the previous Administration, we cannot exonerate them from a straight repetition of the Conservatives' methods. The credit squeeze is an extremely arbitrary restriction which, while doing good in certain areas, indubitably does harm in others. The speech of the hon. Member for Fermanagh and South Tyrone (The Marquess of Hamilton) drew attention to that.
Surely a way can be devised whereby those areas which urgently require investment and expansion—almost all Scotland comes into that category—can be protected from the deflationary damage of such measures. I hope that when the First Secretary outlines in detail the powers of the regional boards which he proposes to set up, he will produce some suggestions to meet this problem. The Liberal Party has repeatedly said that devolution of government can provide an administrative framework within which such problems can be solved.
Secondly, I should like briefly to comment on the 6d. charge on petrol. The Government have said that they believe in regional development, but there can be no doubt that the increased fuel tax will tend to exaggerate the regional imbalance within the United Kingdom. Instead of taxing congestion and thus making transport more expensive in the areas from which the Government should try to attract industry, the tax will have its greatest incidence in the most sparsely populated areas where transport costs are already highest.
Far too little attention has been paid to the problems of transport in areas of sparse population. If we want to populate the depopulated areas, this problem


must have our earnest attention. In the Highlands we now pay more than elsewhere because of the petrol zoning system, and the 6d. surcharge will only exaggerate and worsen the existing differential. It will mean an increase of about 2½ per cent. on freight, which will affect agriculture, industry and the cost of living generally. It will make passenger traffic more expensive and it will do that even allowing for action on the Government's proposals for rural bus services. Surely if we believe in regional development, these are the very things which Government policy should be directed to cheapen as an incentive to population redistribution.
I thank hon. Members very much for their forbearance with me and I am very happy that this forbearance need no longer be extended.

5.52 p.m.

Mr. William Warbey: Since I have been in the House, I have made no fewer than three maiden, or what I might call demivierge, speeches, the first definitely a maiden in 1945, the second when I returned here in 1953 after an absence and the third today, when, for the first time, I have to make a speech of congratulation to hon. Members making their maiden speeches. I do so with very great pleasure. It is an advantage from my point of view that I am making up for lost time by dealing with three at once, so that I am getting nearer to the general Parliamentary average.
It is also a pleasure because I can compare the maiden speeches which I have heard today with those which I have heard during the 13 or 14 years that I have been in the House, particularly with those which some of us heard in 1945, when there were even more "new boys" making maiden speeches than there are in the present Parliament.
I have been tremendously impressed by the extraordinarily high quality of the speeches which we have heard from maiden speakers in this Parliament. It has been fascinating to find that there is not only a new generation of "new boys" coming into the House, but also a new approach to our problems, which, while bringing in knowledge of the outside world and taking perhaps a more scientific attitude towards some of our problems than we have enjoyed in the

past, at the same time does not shrink from controversy.
We have had a little difficulty in this Parliament because some hon. Members have not strictly observed what used to be regarded as the traditional rule, but you, Mr. Deputy-Speaker, quite rightly pointed out this afternoon that the traditional rule is that the speeches of hon. Members making their maiden speeches are not interrupted and that, while it may be to the advantage of the maiden speaker that he should not provoke interruption, nevertheless, he is not bound to stick to pious platitudes and has a duty to his constituents as well as to the House to comment on the controversial issues of the day.
All three of the maiden speakers who have taken part today have done this. The hon. Member for Fermanagh and South Tyrone (The Marquess of Hamilton) brought a new wind from Northern Ireland, which we so often tend to forget in our problems. He reminded us, sitting here in London, of the formidable problems which still have to be solved in that area, and he did it with dignity, calm and a quiet sense of duty to his constituents and the House, and we shall hope to hear more from him again.
We then heard my hon. Friend the Member for Wellingborough (Mr. Harry Howarth), who comes to us from an English borough and who brings to us, once again, a strong sense of what the ordinary working people, the simple humble folk, in our country are expecting from the new Government who have come to power after 13 years out of office.
Finally, the hon. Member for Inverness (Mr. Russell Johnston), whom we are very pleased to be able to welcome officially, brought us not only the atmosphere of the Highlands, but the costume of the Highlands. I do not know—I cannot see—but he is probably breaking another tradition of the House lower down. I cannot see, and I therefore do not propose to call your attention to it, Mr. Deputy-Speaker; but I could see, as we all could, that not only did he appear to us in an interesting outward manner, but that he had a great deal of interest to say about the problems of his area, problems which have much bearing on the issues which we are discussing. We shall hope to hear the hon. Member, one


of the Liberal Party's additional 50 per cent., and my hon. Friend much more and in a more controversial fashion in the days which will come.
The hon. Members touched on one of the fundamental issues of the debate, which is whether it is possible to pursue a policy of the inflation or expansion of productive investment and growth, in Scotland, Northern Ireland, Wales or England, while at the same time pursuing a deflationary financial policy. That is the problem now confronting us. I would have thought that we might have had some constructive speeches from hon. and right hon. Gentlemen opposite about how we could solve this basic problem of the British economy. The problem of relating financial policy to productive growth policies—the production of goods and services to meet the needs of the people and to provide an export surplus to pay for our necessary exports—has been be-devilled ever since the end of the war by the outside control of financial interests of the activities of Britain.
My maiden speech in 1945 was not on this subject, but on world government. My second speech, however, in which I was able to indulge in some controversy, was made on the agreement to take the American loan immediately after the war. I am reminded of that very much today, because we are in a very similar situation to the one which prevailed in 1945 and because very similar remedies are proposed.
I voted against the American loan agreement. I do not think that any of my hon. Friends who also voted against it are here at the moment. Some hon. Members opposite joined us in the Lobby and voted against the proposal that we should accept the terms of the loan. We voted not against the loan, but against the terms imposed on this country by the international financiers who put up the money for the loan. I voted against the Labour Government. It was the one and only occasion on which Mr. Herbert Morrison, now Lord Morrison of Lambeth—that great Socialist disciplinarian—winked his eye at a rebellion. It was made perfectly clear that the Government had no objection to Members freely expressing themselves against the onerous terms of the American loan put on this country.
Moreover, the Labour Government published to the whole world the full terms and conditions on which the money was lent, including the conditions which affected the economic and financial policies of this country. I ask my right hon. Friend the Chancellor of the Exchequer to do the same in respect of the loans which we are now having to obtain from the international financiers and the International Monetary Fund. I hope that he will follow the example of the Labour Government of 1945 and take the people of Britain and America, and indeed of the world, into his confidence and explain exactly why the Government are compelled to pursue internal domestic policies which seem to run counter to many of the things which we put in our election manifesto.
In 1945, we had just emerged from a great war. Our state of insolvency was due to the war. This was accepted and admitted by Sir Winston Churchill. Although we had tremendous arguments with Sir Winston in those early post-war days, one of the things for which we always gave him credit was that he acknowledged the truth of the economic and financial situation facing the Labour Government in 1945 and did not seek, as the right hon. Member for Barnet (Mr. Maudling) sought this afternoon to do, to throw the blame for the financial and economic situation on the Labour Government. He told the world that we had emerged from the war financially bankrupt because we had given of our blood and treasure to win the war and that was why the Coalition Government had been compelled to apply to the Americans for a loan and to accept the conditions of it.
The situation today, however, is very different, as the right hon. Member for Barnet knows, in two respects. First, we are not bankrupt but temporarily insolvent, both externally and internally. Externally, we shall owe our creditors £800 million by the end of the year. Internally, we are running a Budget deficit which, despite the actions taken by my right hon. Friend the Chancellor of the Exchequer, will be about £400 or £450 million, about half what the right hon. Member for Barnet budgeted for, but still not enough, it appears, to satisfy the international financiers whom the right hon. Gentleman called in aid this afternoon.
The other difference is that this insolvency is not due to a great war. It is due to the financial and economic situation created by the action of the Government's predecessors. The right hon. Member for Barnet, when he was Chancellor of the Exchequer, introduced two Budgets—in 1963 and 1964. In those Budgets he boasted of the fact that he had budgeted for a high deficit on the balance of payments in 1964 and an internal deficit of nearly £800 million. Is that true or not?
I am glad to see that the right hon. Gentleman is here. He cannot escape responsibility for creating this situation. He created it; he boasted of it. He said, "Of course, my measures will lead to a deficit in the balance of payments, but when that deficit arises we shall be able to borrow our way out with the money from the European bankers and the International Monetary Fund". This is what he said, and, therefore, the fact that the Labour Government has had to go to the European bankers and to the Committee of Ten and to the international Monetary Fund for financial help to tide them over their temporary insolvency is entirely due to the policy of the right hon. Gentleman. He could even claim that he has achieved a remarkable success, because while he anticipated that the external balance of payments deficit would be only about £500 million or £600 million, he has, in fact, managed to push it up by his actions to somewhere approaching £800 million.
With the internal Budget deficit he has not been so successful. Although he budgeted for an internal deficit of £800 million, which some of us described at the time as a reckless and irresponsible gamble with the nation's finances and an utterly reckless inflationary policy totally unrelated to reality, because of the postponement of the General Election he had to start introducing measures to offset the Budget deficit which he had planned. He knows very well that he was advised to take these measures by the international financiers and the international finance institution.

Mr. Maudling: Poppycock.

Mr. Warbey: I think that the right hon. Gentleman said, "Poppycock".

Mr. Maudling: I did.

Mr. Warbey: If he says that that is poppycock, O.K. But let us see whether this one is poppycock. Let us regard the external deficit. The agreement for the loan necessary to cover this deficit was signed by the right hon. Gentleman himself at the beginning of August. Is that poppycock? If it is poppycock, then M. Pierre-Paul Schweitzer, the Director of the International Monetary Fund, was also talking poppycock when he said last week, as reported in The Guardian of 13th November, that he had not come to London to discuss the United Kingdom standby credit of 1,000 million dollars; that had been approved in August. Was it approved in August?

Mr. Maudling: Or July.

Mr. Warbey: August or July—all right.
Moreover, that agreement included certain terms and conditions in regard to the policies which should be pursued by the British Government which took the loan. Is that true or is it not? The right hon. Gentleman has an opportunity of answering the question. He has said that some of my previous suggestions were poppycock. [An HON. MEMBER: "One Of them."] I beg the right hon. Gentleman's pardon. The right hon. Gentleman said that one of my previous remarks was based on poppycock.
The right hon. Gentleman has an opportunity to intervene and say whether it is also poppycock that there were certain terms and conditions attached to the agreement which he made with the Director of the International Monetary Fund in July or August, and that they include conditions regarding the economic policies which were to be pursued by the British Government when they took up the loan. The right hon. Gentleman does not reply; I assume that on this occasion I am correct and that this is not poppycock.
M. Schweitzer went on to say that, while there was no legal obligation on Britain to renew consultation on the grounds of policy changes, there was a certain moral obligation. He underlined the force of the moral obligation by saying that if and when the 1,000 million dollars fund was exhausted, it might be necessary for the British Government to


ask for more. He indicated very strongly indeed that the International Monetary Fund would be watching our behaviour, seeing whether we were carrying out the agreed economic policies and seeing whether we were complying, if not with our legal obligations, with our moral obligation, before they decided on giving us a further advance.
The right hon. Gentleman, alone or with his colleagues, is responsible for all of this. He signed the agreement. He created the situation in which the loan became necessary. He was prepared to accept the international bankers' and financiers' terms, and we know today what those terms were. We know that they were that the Government should follow a deflationary financial policy. We know that the terms were that there should be a restraint on internal demand for goods and services, and we know that in general the conditions were that we should pursue a policy of orthodox finance, as understood by the bankers in the City of London, with which the right hon. Gentleman is now more closely acquainted, and the financiers in Basle and Zurich, in Paris and New York.
The right hon. Gentleman has called attention to the fact that there are foreign critics of the policies of the Labour Government. We know who those foreign critics are. We are all able to read the newspapers and to watch television. We saw that hard-faced Swiss banker come on to television a fortnight ago and say that the measures proposed by the Labour Government in the White Paper were not sufficient and that more drastic measures would be required. Is that not so? I see the hon. Gentleman nodding.

Mr. Edward du Cann: I did not see the programme.

Mr. Warbey: The hon. Gentleman can take my word for it. At least, if he cannot see television programmes, he can read the newspapers, and he will no doubt have read the reports in The Times. The Guardian, the Financial Times and others of the views of the Swiss bankers on the Labour Government's policy, particularly those views which have been expressed with great force during these last few days, to which the right hon. Member for Barnet tried to divert attention when he was anxious to divert attention away from his own record and responsibility in this matter.
The Swiss bankers have made perfectly clear that, in return for what they are doing to help the Labour Government and to protect sterling, they want an internal deflationary policy to be pursued.

Mr. Harold Lever: My hon. Friend says that the Swiss bankers play a particularly prominent part in putting the screw on this country in return for the advances made to us. As I understand, the Swiss are contributing a minute part of the moneys required and borrowed, indirectly or directly, by the Government. Can my hon. Friend explain why the Swiss have this key position in putting the screw on the Government which he attributes to them?

Mr. Warbey: I am grateful to my hon. Friend for his assistance. His intervention enables me to use a little more information in this connection with which the House should be acquainted. I am obliged to him for anticipating the point I was about to make, that it is the Swiss who made the greatest fuss in E.F.T.A. and who have been responsible not only for trying to force us to remove the import surcharges—

Mr. Harold Lever: Mr. Harold Lever rose—

Mr. Deputy-Speaker (Dr. Horace King): Order. I hope that the hon. Gentleman will realise that interventions prolong speeches and that many hon. Members wish to take part in the debate.

Mr. Warbey: I was making the point that the Swiss bankers are the ones who stimulated the very hostile attitude towards this country in the E.F.T.A. negotiations and endeavoured to persuade us to remove, or to agree very speedily to remove, the import surcharges. They were the main instigators of the establishment of an E.F.T.A. economic committee whose duty, I understand, is to act as a watch-dog over the economic policies of the British Government. Perhaps a Government spokesman will tell us a little more about that.
I note here, also, a very interesting connection between the bankers in Switzerland and the bankers in the City of London, with whom the right hon. Member for Barnet is now so closely acquainted. In a report from


its Zurich correspondent, The Times says today:
Last week's transfer of sterling to Swiss banks is believed to have exceeded the level of the week before, when an inflow to the value of 100 million Swiss francs came in. It is not known exactly where these funds came from but a substantial proportion is understood to have come from Britain itself. Speculation against sterling was certainly intensified by the fact that no change was made in Bank rate last week.
Thus, we see that a great part of the capital which has been flowing out of this country during the past year, and a great part of the gold and currency resources which have been flowing out of this country during the last week or two, has been British "funk" money going abroad, seeking the protection of foreigners whom the right hon. Gentleman called in aid.
This is not the first time it has happened. It has happened during previous financial crises. It happened, for example, in 1957. All hon. Members who have read the Report of the Bank Rate Tribunal which was set up to investigate what happened in that year will have very much in mind the famous letter written by Mr. W. J. Keswick, a director of the City finance and merchant house of Matheson and Co., to Mr. Hugh Barton, the managing director of Jardine Mathiesson & Company in Hong Kong. Most hon. Members will remember the famous words:
My advice … all round is to sell … This is anti-British and derogatory to Sterling but, on balance, if one is free to do so, it makes sense to me".
It is interesting, to look at the context in which that letter was written. It was dated 16th September, 1957 and read in part as follows:
John"—
that is, his brother John—
tells me you are asking for a cable about our views on devaluation and especially about the merits of selling Gilts … Personally, I do not believe the Chancellor dare devalue, and therefore he will resort to all measures before so doing. The speculative pressure against Sterling is very severe indeed … My advice, therefore, all round is to sell … This is anti-British and derogatory to Sterling but, on balance, if one is free to do so, it makes sense to me.

Yours ever,

W. J. Keswick."

The right hon. Member for Barnet is now a director of a city financial institu-

tion.He has complained today that the abrupt actions of the Labour Government in catching the City napping by ordering an increase of Bank Rate on a Monday instead of waiting till Thursday was upsetting the finely balanced investment policies of the City investment houses.

Mr. Maudling: Mr. Maudling indicated dissent.

Mr. Warbey: The right hon. Gentleman must now have close experience of these matters, acquired particularly during the past two or three weeks since 16th October. I should like to know how much British "funk" money has left the City of London since 16th October. I dare say that the Chancellor of the Exchequer will be able to give this figure, but no doubt the right hon. Gentleman has it also in his mind and could enlighten the House about it.
Perhaps the right hon. Gentleman could tell us also what advice has been given by City financial institutions to investors inquiring whether they should continue to support the £, whether they should continue to buy gilt-edged securities, or whether they should export their capital to other countries and into the securities of other countries. Were they given the kind of advice which Mr. Keswick was giving in 1957? That is what I should like to know, and it is what the country would like to know.
How much longer is this country to tolerate the anti-British activities of the City financial institutions? What steps do the Government propose to take to bring the financial institutions of the City of London under British control? They are no longer under the control of men who are loyal to Britain. They are under the control of men loyal to the international financial community of the so-called free world, men like Mr. Keswick who thought there was nothing wrong, from the financial point of view, in being anti-British and derogatory to sterling. How much of that kind of advice has been given in the City during the past two or three weeks?
How are we to bring these gentlemen under the control of the British people and the British Government? It is clear that the nationalised Bank of England can no longer do it. Thirteen years of Tory rule and financial policy have broken the City's financial institutions


away from the control of the Bank of England, and the Government who created a free internal money market, a free capital market, a free international money market and a free international capital market know that this is true.
They know that the right hon. Gentleman tile Member for Barnet has been one of the principal instigators of that policy and they also know, as he knows, that the demand of the British people will now be that we stop this "funk" money from going abroad, that we see British capital invested first and foremost in Britain and our productive activities, to finance our productive investment, then in the under-developed countries and then, and only then, if there is any left:, can it go and seek its hideyholes in the Bahamas, New York and the south of Spain.

6.31 p.m.

Mr. Peter Hordern: I rise to ask the indulgence of the House in this my maiden speech. I have been fortunate enough to have heard a number of maiden speeches and it occurs to me that all of them have had one thing in common, the quite exceptional character of the hon. Members' constituencies. I should like to say at once that the Horsham constituency, which I have the honour to represent, is as exceptional as anybody else's, and probably a great deal more so.
My constituency has known only two hon. Members during almost the whole course of this century. The first was Lord Winterton, who was a Member here for 46 years and who was Father of the House. I am sure that he will be remembered by many hon. Members with affection and esteem. I understand that during the war he formed an unusual partnership with the right hon. Gentleman the Member for Easington (Mr. Shinwell). There were occasions, as it seemed to them, when the Government of that time were inclined to bypass the House in making their decisions. Between them, they objected strongly. They came to be known, I understand, as "Arsenic and Old Lace".
I do not know under which term the right hon. Member for Easington would recognise himself now, but I scarcely think that it could be old lace. However, I am delighted to find the right

hon. Member for Easington still here, forming something of a link over so many years, and still clearly in such excellent form.
My constituency is unusual too in that it has grown in the number of electors from 49,000 in 1951 to 86,000 today, mainly due to the increase in the number of electors of Crawley New Town. I pay special tribute to my predecessor, Mr. Gough. He deserved and won during the last 13 years, during which he served the constituency of Horsham, the admiration and affection of all his constituents, no matter which political party they may have supported. He will be remembered with esteem by many hon. Members on both sides of the House who will miss his presence here.
My constituency combines in a unique way the problems of the old and the new. From Horsham, west to Harting, there lies the most beautiful stretch of country, all of it within 60 miles of London. From whatever point one may stand in this area one can observe the line of the South Downs. There are more spectacular peaks in England, sharper and more vivid contrasts in scenery, but for sheer harmony of woods, fields, hills and sky, I can think of no other view in England to touch it.
Most of it, and rightly so, has been designated as an area of great natural beauty. Yet it is this same area which, if the Central Electricity Generating Board's proposals are carried through, will be bestraddled by gaunt and ugly monsters of pylons, each of them about the height of Nelson's column. I know that a maiden speech should be uncontroversial and I maintain that, from a party political point of view, that mine is, but I am quite impartial in my opposition to the Central Electricity Generating Board's proposals, no matter which party was responsible for carrying them out.
In an effort to be constructive, I make this suggestion on this topic. In view of the need to restrict Government expenditure at this time of great economic difficulty, I suggest that the Government defer the decision to construct these pylons indefinitely. We can give the Government all the time they like, and part of the money saved in this direction could be spent on research into underground cables.
I said that my constituency combines the problems of the old and the new in a unique manner, yet from the point of view of the Bill before the House the problems are not so very different. It is to be regretted that so little mention has been made in the Bill of savings. Many of my constituents in the rural areas depend on their savings for their livelihood. In Crawley New Town also, where there is a majority of young people, I hope that the Government will appreciate that the only effective way in which they can buy the necessities of life and set up home is by saving—and that they are unlikely to have been helped by the provisions of the Bill.
Then there is the whole question of aid to industry. There are a number of new science-based industries in Crawley —electronics and high-vacuum techniques, to mention only two—and these need to attract fresh capital as a first priority. There is no doubt that the proposed corporation tax will make it more difficult for them to do so, to attract fresh capital, in the sense that it will be more difficult for the newer companies to pay out higher dividends and, ultimately, more difficult to increase the prospects of further employment in Crawley itself.
In Horsham, the largest single employer of labour is a Swiss-owned company called C.I.B.A. I am sure that the Chancellor has weighed carefully the effect of his proposals on foreign investment in this country. Frankly, however, I cannot see how they can help the prospects of expansion and further employment in Horsham. Be that as it may, I am sure that the purpose of his proposals for a Corporation Tax and Capital Gains Tax is to help the First Secretary achieve an incomes policy. All hon. Members will wish him well in his task, but I hope that in arriving at such a policy he will not impair the ability of industry to attract the capital it needs.
At present, we are in the dark. We do not know at what rate the Capital Gains Tax or the Corporation Tax is to be levied. Nor can we reasonably expect to do so until, as the Chancellor said, the Budget in April. But what we surely can expect to know is the machinery of this new taxation. We do not know whether pension funds will have to pay Corpora-

tion Tax or whether investment trusts and even trade union funds will have to pay taxation on income which is already taxed abroad. Until we know, professional investment for industry can no longer be professional but entirely speculative, just what the Prime Minister was telling us to avoid in his speech at the Guildhall.
I have this morning received a letter from the Chancellor telling me that he is unable to reply to the questions I have asked concerning these taxation problems. I hope, therefore, that he will now make an early statement about these problems, preferably in the form of a White Paper, because at present no professional investment is possible in the City of London and, therefore, industry cannot attract proper investment. The sooner the Chancellor makes his proposals clear, the better.
This is not a special plea, therefore, for the City itself, but for the efficient functioning of the economy. I do not now wish to discuss the effect of the Budget on the economy or, indeed, our present economic situation, but I want to make just one or two points about the basic position of sterling in relation to other currencies, and to world trade.
It is a source of pride to us all that half the world's trade is financed by sterling, yet in this very position there lies a constant threat to the state of our economy, no matter which political party is in power, for, be our economy never so strong, the fact that foreign holders of sterling may, for whatever reason, prefer to finance their trade in another currency, can bring to bear an intolerable pressure on our resources and stultify our long-term plans for our economy. It is literally true that an economic sneeze at home can make us retire to our beds under doctor's orders. We already have a panel of doctors appointed by E.F.T.A.
Basically, this is no fault of any political party, or of any domestic measures adopted. It is as though we were always going in to bat six men short on a difficult pitch and in a treacherous light. It is a position that, to say the least, inhibits free stroke play of the kind that the right hon. Gentleman and his hon. Friends wish to play. Nor will our position improve, even if the surcharge on imports should prove to be an unqualified success for we can only succeed in cutting down our imports at the expense of other


countries' exports, and there is no reason, in that case, why they should not adopt precisely the same measures to protect their own trading position.
What we must seek to do is to expand the whole credit basis for world trade. In 1948, the world total of monetary reserves compared with the value of world trade was 46·8 per cent.; today, it is less than 25 per cent. We all hope that world trade will expand—indeed, our economy is dependent upon its expansion—but, unless something is done to swell the world's monetary reserves, the margin of error under which any country will work will become progressively finer and, because we transact so much of the world's trade with such a small proportion of its resources, the margin of error available to us will eventually become almost infinitesimal.
Something must be done soon about this situation. Various proposals have been made over a number of years, and I do not wish to take up the time of the House in discussing them now. The latest initiative was in September, 1962, when my right hon. Friend the Member for Barnet (Mr. Maudling) put forward at the I.M.F conference a suggestion for a mutual currency account. That was not accepted at the time, but the initiative itself must at least have helped those in other countries to see the logic of the situation.
I believe that we should now take a further initiative along the same lines. Should such an initiative be taken but not succeed, I believe that we should then try to form a more limited agreement between the sterling area and as many other European countries as we can get to join. We should start with the E.F.T.A. countries—to whom we now owe a great deal—and the other, Common Market, countries in forming a new European Reserve Bank, with a new unit of account based on sterling reserves and the reserves of other European countries as well.
I foresee that if such a thing were to happen, this European Reserve Bank would be far more generous in its allocations and allowances than the International Monetary Fund now is, or even the World Bank. What is essential is that we should establish a larger credit base, not just for the sake of our own economy but for the sake of making

more funds available for the development of the poorer countries, upon whom the expansion of world trade ultimately depends.
It is because of the importance of sterling in the world today that I feel that we should constantly take the lead in monetary diplomacy. It is because I believe that we should take this lead, which will do more than anything else to expand world trade, and thus improve the livelihood and the lot of millions of people in under-developed countries, that I am proud to be a Member of this House, and grateful for the indulgence that it has shown to me.

6.46 p.m.

Mr. Harold Lever: I consider it a privilege to follow the hon. Member for Horsham (Mr. Hordern), and I very sincerely congratulate him on his maiden speech. He started with a very ready sense of the things that please this House: a sense of continuity with predecessors, and of interest in his constituency. The hon. Member went on, somewhat to my surprise, with a speech full of very "hearable" meat, if I may mix metaphors, on the international situation.
I hope that I am not making a wrong comment in saying that had that speech been made from this side it would have been regarded as very controversial, because in its serious, lucid and sensible approach to the problems of this country it was in contrast altogether to the rumbustious harlequinade to which we have been treated by the right hon. Member for Barnet (Mr. Maudling). The hon. Member for Horsham very rightly, carefully and sincerely put together the true facts about this country, namely, that we have chronic difficulties because our position in the world and the inadequacy of liquid resources to finance world trade bears very hardly on sterling, one of the two main currencies.
I did not agree with one or two details of the hon. Member's suggestions for meeting the situation, but I must confess that in his approach I find something very sympathetic to my own ideas. I hope that we shall hear more from the hon. Member. I know that when his name goes up on the "ticker" I shall certainly make haste to hear what he has to say, whether or not he is controversial,


according to the circumstances of his speech.
The hon. Gentleman has made me a little ashamed of some of the things I have to say, because I hope that this will be the last debate in this period and situation of considerable economic and financial gravity that we have to score debating points from each other, but some things have to be said after the speech of the right hon. Member for Barnet. I remember vividly when the right hon. Gentleman got his first junior job in the Conservative Government—I was on the other side of the House, and this is many years ago—saying that he had been appointed for his vices rather than for his virtues. Although he has plenty of the latter, he has, apparently, not a few of the former, because, at a time like this, he has sought to persuade the House that the financial crisis now facing the country is largely the making of the present Government.
For example, the right hon. Gentleman says—and, apparently, says it in all seriousness—that the fact that the Government disclosed and discussed the deficit facing the country on payments account this year—a discussion that was accurate, well-informed and necessary on a matter before the House of Commons —is responsible in part for the speculation against sterling. I do not know what he wants the Government to do. Does he want them to keep these figures in the dark, as he did, to some extent, before the election?
The right hon. Gentleman now proceeds to say that the way in which the figures have been presented to the House of Commons and the world gave the impression to the world that we were running a bigger deficit than we are. If that were true, and if this criticism has any sanity in it, the sterling exchange will do very well in the next few days following on the right hon. Gentleman's speech today, because he has explained to the nervous speculators against sterling the true position; namely, that of a deficit of £700 million or £800 million, something like £500 million is due to capital account or once-and-for-all movements of sterling.
The right hon. Gentleman's voice is heard. There are newspapermen who work in this place. Not a few of us knew

all of this before the right hon. Gentleman spoke. Therefore, I cannot understand why he should suppose that he uniquely was aware that this £800 million deficit was not all that serious. He was painting a picture of the international holder of sterling as fantastic as some which we get from ill-informed Members on this side of the House.
It is a pure fantasy to suppose that there is a sort of nervous, hard-faced gentleman in Zurich or Basle who hears of debates in the House of Commons and says, "My goodness, £800 million deficit. I must sell my sterling at once," not pausing to inquire what the true extent of the deficit is, how much is due to current account, how much for once-for-all items, for capital and so on. It is absolute piffle and it is disgraceful that the right hon. Gentleman—the Chancellor of the Exchequer until a month ago—should treat the House to bunkum of this kind and suggest that the sterling crisis is due to the presentation of figures perfectly accurately known to him and everyone else concerned in the matter.
It is the same kind of nonsense to suggest that the act of putting on the surcharge on manufactured goods is responsible for our difficulties—not because we did it, but because of the way we did it. [HON. MEMBERS: "Hear, hear."] I hear certain sympathetic murmurs, but that is not my view; it is the view of the right hon. Gentleman. What hurt our E.F.T.A. partners, so it is argued, was not loss of trade caused by the imposition of these duties, but the rudeness or lack of polite anticipation of our intentions, which would have been mitigated by the action of a suave, urbane Conservative Government. They would have put the surcharge on, but they would have done it with that sophisticated charm which would have eased the pain, we are told, to a point where it would have done no harm to our financial position. I suggest to all hon. Members that that is pure bunkum.
What caused the E.F.T.A. protest and protest from our other trading partners was the injury caused to their trade when we reduced the imports and that we reduced them in breach of the letter of our agreement. It is clear to me that the Government tried to honour the spirit of the agreement, although in the circumstances they did not feel permitted


to honour the strict letter of the agreement. What hurt and caused difficulty was not lack of politeness on our part or lack of an attempt to negotiate this matter in advance, but that we had to reduce the flow of their trade to this country for the time being without any agreement.
According to the preposterous theory of the right hon. Member for Barnet it was the trifle and not the substance which caused the injury. What would have helped would not be negotiation beforehand, but some proper projection of our position immediately after. I wonder whether the Treasury does all that can be done to propagate the British point of view through our embassies, the commercial and financial attaches everywhere in Europe, to ensure that people affected by these decisions understand the motives for them. I should like to see more done to explain Britain's position.
If people in other countries will listen to the illiterate arguments I have been demolishing they may not understand that the difficulties of this country's trade position in Europe. The people of Europe should understand that we did what we did with a heavy heart and that there is no party in this State willing voluntarily to disrupt the pattern of trade arrangements which has been so carefully and painfully built up in the post-war years. We were very sad to do it and I am sure that the Chancellor in particular did it with a heavy heart. I do not have to appeal to him because I know that, without an appeal, he will reduce and abolish these duties at the earliest possible moment. I am sure that as soon as our position permits he will reduce and abolish them.
It is not helpful to hear talk from the lunatic fringe, on either side of the House, about committees of watchdogs set up to consider our affairs. There are no committees of watchdogs except the Government and Parliament of this country. If we reach honourable deals and arrangements and attempt to remove friction in future, only harm can result if people say that the committees are in the nature of watchdog committees. This is absolute nonsense.
I very much welcomed the statement of the Chancellor, as far as it went, to deal with the problems of the City in

relation to the new taxes which are to come in the spring Budget. Anyone who understands the difficulties of tax legislation will realise that the Inland Revenue has probably bitten off about as much as it can chew in undertaking to produce a corporation tax by the time of the next Budget. It is doubtful whether it could produce one to be imposed by the next Budget and to come into effect immediately. It has taken on a considerable task by undertaking to provide for the House a well worked out tax.
It is rather too much to ask the Chancellor to disclose the details, but there are some very good reasons why he anticipated the general principles of his Budget and foreshadowed the proposals. One reason is that which was mentioned by the hon. Member for Horsham, in his very well-informed speech, that some indication of these proposals would be helpful in pursuing an incomes policy and coming to an accommodation with the trade union movement on wages. questions.
For example, it was important that the trade union movement should know that the Labour Party intended to implement its Capital Gains Tax proposals. It was important that the trade union movement should know that the Labour Party intended to honour its pledges that corporation incomes would make their contribution to an incomes policy, as pledged in our policy statement before the election. These tokens of our intention had to be given.
There was a second reason why this should be done. It is that this is a very complex tax which affects many interests, and some may be affected very gravely- It was, therefore, important before the tax was put before the House of Commons, still more important before it was enacted, that those who will be affected should have an opportunity of making detailed representation. When we deal with a thing like Corporation Tax, it is not like dealing, with say, a 15 per cent. duty on lead pencils. It is an exceedingly complex matter and representations cannot be made in a day or a week.
The Chancellor rightly saw that if they were to be effective and useful they had to be made with ample time for both parties to study the proposals, counterproposals and all possibilities. So the Chancellor, when he announced these


things in advance, did so not out of a desire to make the City's flesh creep, but in large part to allow it to put forward constructive proposals which would enable time to achieve his objectives from a fiscal point of view while inflicting the minimum of discomfort and dislocation on the City from its point of view.
I have not the least doubt that the City will respond in traditional manner and make full use of the opportunities which the Chancellor has given. I dare-say that people are not stumping on soap boxes, but are preparing, very properly and with great care and study, their ideas to put before the Chancellor to explain to him how his objectives can be achieved without necessarily dislocating City procedures.
I pause to say this. The Chancellor's statement today was good so far as it went. It is not easy to get the Revenue to divulge anything at all in advance of its intentions, and I understand that, but I think that my right hon. Friend must go as far as he can to let the City know in what way he is thinking in principle, without committing himself to details. I am sure that my right hon. Friend will understand that there is considerable uncertainty in the City and some—from the point of view of members of this party who know something about the City—unbelievable fears. I will deal with one point, to give an illustration.
Investment trusts, and those who manage them, are alarmed that if a corporation tax is put on, and there is no provision to prevent double or treble taxation, the whole investment trust organisation will be put out of business, and that is a real danger unless it is guarded against. I have no authority to speak on behalf of the Chancellor, or the Government. I speak from personal knowledge of my own party and of the Government, and I say that it is preposterous to suppose that the Labour Party has any intention of applying a Corporation Tax in such a way as unnecessarily to put out of business the investment trust movement of this country. In my opinion, it is out of the question that the Labour Party will do anything of the kind.
I hope that at some point, when he has had his discussion and moves on, the

Chancellor of the Exchequer will be able to reassure the investment trust movement that it does not have to believe the bogey-man view of the Labour Government Front Bench put up, very illadvisedly, by the Opposition Front Bench. The businessmen in the City will learn that in the long run the Labour Party and the Government are something not inimical to their long-term interests. [HON. MEMBERS: "Oh."] Let me say straight away that I do not expect a Labour Government to cause enthusiasm in the City. If the hon. Member wishes to intervene, I will give way to him.

Sir Robert Cary: Surely the policy of the party opposite is a Socialist policy, which is what hon. Members opposite want to establish and accomplish?

Mr. Lever: Of course it is, but the point is that this does not make an impossibility the co-operation of the City. In our policy we recognise explicitly that there is a place for private enterprise as well as public enterprise. That is Socialist policy and, naturally, the City represents the private enterprise part.
As I say, I do not expect a Labour Government to enthuse the City. If they did, I confess that I should be very disappointed in that Labour Government. Cynics may say that we can get a Tory Government in this country at the present time only if they pursue the social policies of our Labour Party and some, after the imposition of the 7 per cent. Bank Rate have said that the only way to get a Labour Government is if they pursue the Tory Party's financial policy. I think that the Labour Government are pursuing the Labour Party policy exactly as they pledged themselves to do, though I do not say that the City will have it as good as it might have had under a Tory Government.
Part of the raison d'etre of the Labour Government is to see that the City does not get it so good, and that City companies bear a heavier burden compared with that allotted to them under a Tory Government. That is not intended out of malice, or a desire to destroy them, but because our standard of fairness and the apportionment of the burden is different from that of hon. Gentlemen opposite.

Mr. J. M. L. Prior: I do not know whether the hon. Member was in the Chamber a short while ago, when his hon. Friend the Member for Ashfield (Mr. Warbey) was speaking. If he was, he must have got a good insight into the ideas of the Labour Party about the City.

Mr. Lever: I remember the late lamented gentleman who was the Conservative Member of Parliament for Orpington—Sir Waldron Smithers. Before I came to this House I noted that he was quoted frequently in Labour Party pamphlets as an authority on the financial and economic policies of the Conservative Party. I was, therefore, a little surprised, when I came to the House, to find that he did not command the universal respect and admiration of his own party as I had been led to believe was the case from the party pamphlets which I had studied.
With no disrespect to my hon. Friend the Member for Ashfield (Mr. Warbey), I may say that he does not command the overwhelming support of this party or this Government. I did not observe anyone on the Government Front Bench taking a careful note of what my hon. Friend said in order to ensure that it was given effect to. I think that by my intervention I indicated I was not entirely satisfied that the argument of my hon. Friend tarried conviction.
There is a difference between the bogeymen which may be erected by some hon. Members on the Government back benches and the bogeymen erected by the party opposite, which puts up Members from its Front Bench to propagate these fantasies and to erect bogeymen which may do harm to the country or endanger our financial position. I am not criticising my hon. Friend, but I say that there is no danger that people abroad will think our position worse than it is because of a speech made by him. There is a very real danger that the kind of arguments addressed to the House by the right hon. Member for Barnet will be taken seriously in some quarters abroad. Happily, if there is careful consideration, I do not think that they would have that effect.
I do not wish to go on for too long, but I desire to cover one or two more points in connection with the financial

situation. First, I want to make the point that the so-called speculative movements against sterling are only speculative in the sense that, curiously enough, people who make them wish to avoid being put at speculative risk. They do not want to risk holding sterling in case they find that they have something less valuable than they were promised that it would be against other currencies, dollars or gold.
So-called speculative movements, whether leads or lags, or movements of hot money out of the country in order to put it somewhere else, or "funk money", are all movements of currency by people genuinely nervous that the £ is to be devalued. It is, therefore, very important that my right hon. Friend, when faced with movements of this kind and faced, as I think he has been at the present time by circumstances not of his making—unless one adopts the fantasies thought out by the right hon. Gentlemen opposite—in those circumstances, faced with a speculative crisis not of his making, should impose a Bank Rate of 7 per cent. to avoid devaluation.
I wish to say a word about devaluation. There are a number of people who favour a policy of a floating £, a devalued £ and that sort of thing. I will not detain the House with the arguments for and against a fixed rate of exchange for the £. It is enough for me to say that I would not devalue the £ because to do so would be to abrogate all the financial arrangements which have been made and carefully built up in the years since the war. It seems to me that the system we have built up shows great promise. Within this system of fixed exchange rates we have been able to expand our export trade and watch the miracle of rising standards of life in all parts of the world, especially in Europe.
I see nothing that has happened, since the world organised itself in fixed exchange rates for its currency and for the stability of international trade, to encourage me to want to wreck that system which has been so beneficial to the world. It has encouraged me to try to add to the reserves for operating that system. I will not go into the technical details of the various expedients suggested for that purpose, apart from pausing to reject what I am glad to say now appears to be a totally discredited remedy, that of raising the price of gold.
I might also mention, in relation to the Bank Rate, the raising of which is wholly justified to safeguard our sterling position and the rate of exchange of our currency, that, if one believes that the pressure which was built up so sharply in two days last week was due to the action of my right hon. Friends, we would like a little explanation from right hon. Members opposite or their supporters as to what caused similar movements in 1957 and 1961 when we did not have these clumsy, stupid, ill-informed, undeveloped, tactless Labour men in charge of our affairs, but slick, sophisticated, knowledgeable chaps provided by the Conservative Central Office. It appears that even the wearing of an Old Etonian tie and the imprimatur of the Conservative Central Office do not necessarily convince the holders of sterling abroad that the £ is in safe hands.
A sensible view of the matter must surely be that the same causes of the 1957 and 1961 waves of speculation against sterling were present in the recent waves of speculation on sterling. Those causes I do not want to repeat over and over again. They were ably outlined by the hon. Member for Horsham. I wish hon. Members opposite would stop the ridiculous distorting argument in relation to our situation, because it prevents any serious discussion of what has to be done, which is on the lines of providing a greater reserve.
I believe, also, that there is a very important difference between the reaction of the Labour Government and that of the Conservative Government to the speculative waves. It is interesting to notice that in 1957 we were not only faced with a solid Conservative Government of sound principles who might have been thought to impress the hard-faced men of Zurich, Basle and elsewhere, but did not. We not only had the advantage of that Government compared with the loose limbed collection we now have, so much despised by hon. Members opposite. We had the further good fortune that in 1957 we were running a near record surplus on our current earnings on trade account. Notwithstanding the fact that we were running a huge surplus on current trading account, and that we had a Government provided by the Conservative Central Office, there was a much

heavier wave of selling of sterling in 1957 than occurred recently and still exists at present. It just will not do to come forward with these juvenile theories.
How are we to correct the situation in which we find ourselves? The first way, on the technical level, is that suggested by the hon. Member for Horsham. It is easier to state in principle than to achieve in practice, because we must get the agreement of like-minded countries to support the expansion of international trade. When we have finished talking nonsense on the subject, and get down to the hard tasks ahead of us. we must all realise this fact, that just as our international defence against aggression in the military and political fields depends upon collective action with like-minded nations, so our financial defence against speculative aggression, risks and upsets equally depends upon collective security organised and arranged.
This is why I am very happy that my right hon. Friend the Chancellor of the Exchequer has shown that he has not renounced the E.F.T.A. arrangement. There has been a temporary aberration from it, forced by our circumstances, and he will want to go back at the earliest possible opportunity. I do not resent the committee which has been set up. On the contrary, to me it is very important evidence that we have not ruptured E.F.T.A., but are building it up to cope even in this difficult situation with the collective financial security which we must build up for our welfare.
I believe in all sincerity that the Labour Party has a special rôle to play, and I hope that it will not be spoiled or injured by foolish statements and unwise remarks, wherever they come from. It has a special role to play, because the kind of society which we need in this country—a dynamic, expansionist and lively society—can be built up by my party more hopefully than by any alternative offered by hon. Members opposite. I have often heard people who hold the Conservative view say that we undermine initiative because we believe in safety from the cradle to the grave. I believe that in the twentieth century a society with humane, social arrangements has the best chance of achieving dynamic economic advance. The most daring trapeze artistes operate with a safety net under them.
I believe that the Tories are completely muddled in supposing that initiative is undermined by providing pensions, and so on. On the contrary, by providing such a society one is providing precisely the basis which in the latter half of the twentieth century enables young men to give of their best and be at their most adventurous; it also encourages mobility of labour, initiative and enterprise.
This is a task on which we are all engaged. This is the crisis which affects us all. I hope very much that, although I myself took part in it to some extent, we shall get away from the debating charades in which we invent bogymen to dangle before the credulous. Let us talk seriously about the problems facing the country, which I am sure we will all deal with together and which, I am confident, the Government we have now are best equipped to solve.

7.15 p.m.

Mr. J. Bruce-Gardyne: It is wish considerable diffidence that I address the House for the first time, a diffidence which is only increased by the polish and content of some of the maiden speeches to which we have listened today. South Angus, the constituency which I have the honour to represent, is I suppose associated in the minds of many hon. Members from south of the Border primarily with beef. We are proud indeed of the connection between our county and the well-known breed of cattle whose name it bears. My constituency also includes some of the best farming land in the whole of Scotland, and, indeed, of Britain, and I may fairly say, some of the best-run farms. There are many other things we produce apart from beef. Among other things, we supply a large part of the British agricultural industry with its supplies of seed potatoes.
My constituency has played an important and prominent role in the history of Scotland. It includes perhaps the most famous of all the ancient castles of Scotland at Glamis. The Royal and Ancient Burgh of Arbroath was over 600 years ago the scene of the signing of the Scottish Declaration of Independence. I am bound to say that some of us on this side of the House perhaps would not like to see that Declaration repeated so long as the balance of party strength is

tilted as it is at present in Scotland, for fear of turning the drift to the South, of which we hear from time to time, into an avalanche.
My friend and predecessor, Sir James Duncan, was, I believe, as popular and respected on both sides of the House as I know he is in the constituency which he represented for 14 years. Prior to that, he had served another constituency for many years and had given the House over 30 years of devoted service. I know that his wise counsel will be particularly missed in our agricultural debates, and I thought that it was peculiarly felicitous that it was during his tenure of office as Member of Parliament for South Angus that the constituency produced the best selling bull and, I believe, the biggest four-footed dollar-earner ever turned out from this country. Sir James will indeed be a hard man to replace.
Like most new Members, I have been advised that a maiden speech is a time for avoiding controversy. I am relieved to learn that this advice is open to various interpretations, for I believe that it is hard for Scots to avoid controversy over political matters at any time. However, I am bearing in mind the advice of that famous son of Angus, Sir James Barrie, that the greatest moral attribute of a Scotsman is that he will do nothing which might damage his career. I shall therefore attempt to observe as far as I may the advice I have been given on this point.
I am grateful for the opportunity to address the House tonight. I shall not be able to follow in the debate some of the previous speakers in ranging round the world and examining the speculative loopholes of its financial centres and I would prefer to come rather nearer home for a few minutes. The Budget and the financial measures which the Government have introduced before and after the Budget have affected my constituents in a number of ways and not all of them are likely to be advantageous. My hon. Friend the Member for Dumfries (Mr. Monro) and the hon. Member for Inverness (Mr. Russell Johnston) have already referred in the debate to the deleterious effect of the raising of the Bank Rate and the increase in petrol tax, in particular, on Scotland and its more distant areas.
I believe that hon. Members opposite have on some occasions in the past complained that the Bank Rate is a blunt instrument which strikes indiscriminately at those areas in the south of England and the Midlands which are suffering perhaps from excessive demand and also at those areas, for example in Scotland, where there is spare capacity. Indeed, by making industrialists inclined to draw in their horns and, in the words of the Chancellor, rephase their capital investment, areas like Scotland are very often made to suffer first. If this was true in the past, I feel that it is equally true today. And it is a source of some regret to us in eastern Scotland that all the advance factories announced by the Government the other day have been placed in the industrial central belt of Scotland.
There is another measure which we are discussing today and which has already been touched upon by my hon. Friend the Member for Dumfries, which I believe actively discriminates, though perhaps unintentionally, against areas like eastern Scotland. I refer to the increase in the petrol tax. This is bound to weigh most heavily on firms situated at a considerable distance from their suppliers and their markets and whose freight costs are consequently higher than those of their competitors who are situated nearer the markets in the South and the Midlands of England. This is a discrimination which was no doubt unintentional, but the effect of it is worrying us in eastern Scotland.
As for the import surcharges, I believe that the greatest possible measure of free competition between competing firms regardless of nationality and on the basis of equality is in the interest of our economy and also in the interest of individual citizens. I therefore find these measures distasteful on principle. I am also particularly worried about the dangerous effect which the manner of their introduction may have on the European Free Trade Association. In my constituency there are a number of firms which have developed a valuable export trade with Scandinavia on the basis of the tariff reductions which we have enjoyed in E.F.T.A. Naturally, anything which might place in jeopardy the future of E.F.T.A., and hence of this valuable export trade which has been built up, we must regard with regret and anxiety.
There is another long-term possible effect of these surcharges to which I should like to draw the attention of the House. The second industry in my constituency is the jute industry. This industry is unique in that it depends for its raw material on two countries situated on the far side of the globe, which also happen to be its competitors in the market for manufactured jute goods, and which enjoy a substantial advantage in labour costs. The jute industry has, therefore, benefited, and I believe rightly benefited, over the years from a special system of protection which sometimes I believe has been a source of some anxiety to some of my right hon. Friends when my party was in power.
The previous Government introduced several modifications to our system of jute protection. I am bound to say that some of these modifications went too far and too fast. I believe that we could have afforded and can afford today to concentrate rather more on drawing the attention of our European friends and neighbours to their duty to play their part in sharing the burden—for it is a burden—of promoting the import of low-cost manufactured textiles from India and Pakistan. The share which they take at the moment is wholly inadequate.
In one respect, however, I believe that the modifications introduced by my right hon. Friends were wise, in that they were designed to encourage the jute industry in Scotland to concentrate more particularly on the sophisticated end of the manufactured jute trade, and to leave the so-called "depressed" range to the imported manufactures from India. It seems to me that there is a danger that the import surcharges now imposed on the import of manufactured jute goods from India could have the effect of pricing this imported depressed range of jute goods out of the market and thereby encouraging firms in Scotland which have moved out of the depressed range to go back into it. If this happened there would be a danger that if and when the surcharges were removed dislocation and damage might be done.
In any case, the future of the jute industry in Scotland will continue to need careful watching. It has enjoyed a period of considerable prosperity in the last year or two, and as a result we in Angus have happily escaped some


of the problems which have affected other parts of Scotland. Nevertheless there is excessive dependence on this one industry, particularly in some of our smaller burghs, and here Her Majesty's Government could help in removing an anomaly.
Apart from one small burgh, burghs in the county of Angus are excluded from the Dundee development district and consequently are at a disadvantage compared with Dundee and the rest of the centre of Scotland in the incentives which they can offer to new and diversified industry to settle in them. But the reason for the Dundee development district is, happily, not the level of unemployment in Dundee, but the special position of the jute industry there. If the industry is in a special position in Dundee, I submit that it is in an equally special position in the smaller burghs of the county of Angus. I notice that in his maiden speech my predecessor for the constituency of South Angus made a plea for the removal of precisely this anomaly. This plea was made to a previous Labour Government, and it went unanswered. In all fairness, I must add that he repeated it on several occasions to my right hon. Friends, and it went unanswered then, too. However, there is nothing like trying for a fourth or fifth time.
In his Budget speech, the Chancellor said that he was interested in ideas for tax reform. I have one idea to put to him for consideration, an idea which has been ventilated already but which, I believe, needs further consideration. I refer to the payroll tax. As I see it, this tax has several advantages to recommend it. It would encourage the introduction of labour-saving machinery in industry. It would discourage labour-hoarding in areas of high employment such as the South and the Midlands. Above all, to my mind—and this is an advantage which should appeal to hon. Members opposite—it could be an invaluable weapon in regional planning as the rate of payroll tax could be differentiated from region to region according to the pressure on local resources. In this way, we should have a real incentive to manufacturers to move away from the grossly overcrowded areas of the South and Midlands and to take advantage of the unrivalled amenities

and opportunities which await them in areas such as the east of Scotland.
Among the objectives of his budget, the Chancellor included the achievement of an incomes policy and an increased drive towards industrial efficiency. These are objectives which all of us can share. But I wonder whether the increase in the cost of living consequent upon the rise in the petrol duty will mean less when it comes to wage negotiations in the months ahead than the inevitably distant prospect of increased welfare benefits on retirement. I had hoped, perhaps unwisely, that the Chancellor. in his drive for increased efficiency in industry, might consider introducing a discriminatory tax against undistributed profits. It has always seemed to me that if we could make firms go to the market for their capital requirements, they would then be judged on their record of profitability and efficiency and would get their money if their record was such that they were likely to contribute to the increased efficiency of British industry.
On the other hand, it seems to me that the proposal, as I understand it, to introduce discriminatory taxation against distributed profits is open to the objections which the Royal Commission on the Taxation of Profits and Income put forward, that it is all too likely to provide a feather-bed for the feckless and a disincentive to industrial drive.
I am extremely grateful to the House for the tolerance with which it has listened to me. I hope that I have not trespassed upon that tolerance too much, and that it will be extended to me on future occasions.

7.34 p.m.

Mr. Dick Taverne: I warmly congratulate the hon. Member for South Angus (Mr. Bruce-Gardyne) on his very confident, well presented and forcefully argued maiden speech. I admire the restrained way in which he avoided making rather more controversial points, particularly as I recently read an article of his in the Statist of which this certainly could not be said.
The hon. Gentleman made several points with great force. He pointed to the undesirable effect of a number of taxes which had been imposed. One


can hardly impose taxes without producing hardship in certain cases, perhaps more in some than in others. The hon. Gentleman also made the point that the rise in the Bank Rate was essentially a blunt weapon which can have undesirable consequences. We on this side, of course, have pointed this out on several occasions in the past. In time, when the effect is felt throughout the economy, why all of us in the Labour Party felt it must be so. This is one of the reasons a great sense of dismay when the Bank Rate was put up.
My sympathy goes out to the Chancellor in the position in which he has been left. He has had more difficulties to cope with in his first few weeks than many Chancellors have in a very long tenure of office. However, I think that we all feel that my right hon. Friend has done right. There has been no criticism of this particular measure in the House so far today. All of us believe that there was really no alternative, in the present situation, to raising the Bank Rate. Either he had to do that or he had to devalue, and we all agree that he has taken the proper course.
We should analyse rather carefully the factors which have led to run on sterling and, in particular, examine the charge made by the right hon. Member for Barnet (Mr. Maudling) that this was the result of the Budget. It seems to me that there have been several factors causing the run and the lack of confidence in sterling. There was the feeling on the part of foreign investors that the measures in the Budget may not have been sufficient. There were the trade figures for last month. There was the fact that the production figures for recent months have not shown any rise in British production. Also, there may have been some doubt about how far the Government could hold the import surcharge in face of the strong opposition which they have met abroad. To this should be added, perhaps, the movement of some British capital abroad. I shall take these influences one by one.
To begin with the last, the movement of British capital abroad, this has not in any sense been qualified and I do not know how serious it is. The only question I have about the Chancellor's methods is whether it would not have been

desirable or necessary—I do not know enough about the figures—to impose a restriction on the foreign movement of British capital. Perhaps he is keeping this in reserve. It is an undesirable measure, as, indeed, any restrictive measure of this kind is, but it is, without doubt, a less undesirable measure than any general deflation.
What has led to foreign lack of confidence in the £? The first question here is the one raised by the right hon. Member for Barnet, whether or not the Budget was inflationary. Undoubtedly, foreign investors have been misled by speeches made by right hon. and hon. Members opposite. The first point to be noted is that other critics of the Budget have suggested, that the Chancellor's measures may be too deflationary. It is a not unusual experience for Chancellors to be fired at from both sides and, perhaps, in defending a Budget, one should start by examining this argument. It was an argument put forward by the Economist which, in effect, said that the Chancellor should have waited to see whether the symptoms of excessive demand appeared.
To my mind, the argument of the Economist went too far. Of course, it is an argument miles away from the attitude taken by the Leader of the Opposition. If one looks at the fact that bank advances have recently increased, at the fact that there have been many indications of a shortage of labour, and that there has been an increase over last year of something like 10 per cent. in money supply, and if one adds the effects of the cut in imports and the export rebates, it is clear that some measures were needed. For instance, it has just been shown that the steel industry estimates that the measures which the Government took would add about 600,000 tons, or 2½ per cent. of its production, to its present commitments. Clearly, some action was needed. As I say, the argument of the Economist went too far.
However, the very fact that the Economist, which has, in the past. hardly been a reckless advocate of inflationary expansion, felt that the Chancellor's measures might be too deflationary should lead one to treat with some scepticism the argument advanced opposite that this is an inflationary Budget.
Why should it be held that this is an inflationary Budget as the petrol duty arid the surcharge will take effect before other inflationary tendencies can he felt, and certainly before any expenditure occurs, about which the former Chancellor felt some disquiet, and that will be paid for by taxes? They will take effect before the full measure of the cut in imports is felt because of stocking.
The figures show that the net increase of revenue is £220 million, and this more than offsets the effect of the combined cut in imports and export rebates and the extra demand to which this leads. The former Chancellor gave no estimate of the extra demand created. It is clear that the sum which will come into the Revenue will exceed this demand. Therefore, it is nonsense to say that it is an inflationary Budget. I hope that foreign investors will not be misled by speeches from the right hon. and hon. Members of the Opposition.
It was argued that perhaps to some extent the Budget was irrelevant to the immediate problems of the balance of payments. It is true that the surcharge is in the nature of a temporary crutch, but, as was pointed out by the Chancellor and by the former Chancellor, the foreign investor should not be mesmerised by the figure of £800 million since a large part of it is due to temporary factors. Apart from the particular measures taken, next year's figures would show a decline, even though there would still be a deficit running at an unacceptable level. But in the short run the surcharge will have a major effect. And in the long term, too it seems to me that far too little attention has been paid to the effect which the export rebate will have. It is said that it is only 1½ per cent. and that it will not have a very great deal of impact of exports. But that is a completely misleading way of looking at it. First, the 1½ per cent. is an average. In some cases it will amount to 3 per cent. Secondly, there has always been a very widespread complaint that profit margins on exports were very narrow. A rebate of 1½ per cent. on top of that will make a considerable difference.
There is every reason to suppose that in due course the export rebate will increase exports to many times the amount

of the present cost to the Exchequer. Hon. Members opposite are trying to have it both ways. They say, on the one hand, that this is inflationary and that inflation will be the effect of this £75 million, and, on the other, they say that it is worthless and does not amount to anything.
There is a third criticism which has been made of the Budget. It is supposed to have led to a loss of foreign confidence in the £ because there is nothing in the Budget to make Britain more efficient in the long term. It is a depressing fact that the performance of British industry has been exceptionally poor. There has been no worth-while expansion of it at a time when in many ways conditions were ideal for expansion. There was a buoyant market at home and abroad. What is more, even under the former Chancellor lavish incentives were provided for investment. Despite this, there has been no increase, and at the same time a shortage of labour has been appearing.
This means, in effect, that there is a fall in productivity instead of the increase which we were led to expect. This was emphasised by the annual report of the iron and steel industry. That industry is supposed to be very efficient. But the annual report says that the productivity in the British steel industry is only half that of the United States steel industry and much less than that of the Common Market.
The hon. Member for South Angus spoke about a payroll tax. There is a lot to be said for that. One of the factors operating has been a bad use of labour; there have been restrictive practices on both sides of industry and there has been a lack of competitive pressures. There are many ways in which one can diagnose the ills of British industry. It is rather more difficult to provide the answer. But while the Conservatives were in power for 13 years nothing was done to remedy the situation, and now they ask what there is in the Budget to solve this problem overnight.
Is an incomes policy something which can be produced overnight or within a few weeks? These problems cannot be solved within a few weeks. Only recently, hon. Members opposite, when they were the Government, realised that there


was a problem at all. These are long-term problems which will require long-term solutions. For years the last Government did not provide the solutions. We cannot expect this Budget or the present Government to provide the answers within a few weeks. The Government have to meet these neglected problems, and it is for that reason that the new "Ministry of Economic Planning" has been set up. Indeed, the President of the Board of Trade has already outlined the proposals that he is studying.
The Chancellor of the Exchequer has had to steer a very difficult course. All the time he has to balance conflicting considerations. He has to face a conflict between foreign confidence in the £ and the measures that that requires, on the one hand, and, on the other, the expansion of industry and the measures that that requires. He must, on the one hand, have recourse to the monetary measures which, unfortunately, foreign investors regard as essential to maintain their confidence in the £. On the other hand, he must avoid shaking the confidence of industry by hoisting a "Stop sign.
Again, there is a conflict between the measures required for strengthening the £ and increasing foreign confidence, on the one hand, and, on the other, the measures of social justice needed to make an incomes policy a reality, quite apart from the principle of social justice. This is not an easy course. It is a course which might make the trials and journeys of Odysseus seem like a Channel crossing in calm seas. There is a Scylla and a Charybdis on either side. On one side there is the whirlpool of devaluation and on the other the monster of inflation, with many sirens and Circes ahead.
The raising of the Bank Rate is not going back to the measures of 1957 and 1961. It is not accompanied by a credit squeeze, as was the 7 per cent. Bank Rate imposed by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). This is something which I hope and trust the Chancellor can withdraw before its effects are felt throughout the country. Let it have its immediate short-term impact in bringing foreign investment back to this country and a return to confidence in the £. Let it not continue so long that the whole economy is affected by its influence. The Chancellor can miti-

gate the social effects of a high Bank Rate through measures which he has said he is studying, through the Public Works Loan Board and through arrangements with the building societies.
It is also unfortunately true that it does not appear that my right hon. Friend can count on a great deal of support from hon. Members opposite. Their attitude is a combined feeling of pique at having lost the election and guilt at not having taken measures earlier themselves. They criticise the Budget for not containing solutions to our economic ills. But it is only part of a three-pronged operation which involves many other Departments than the Treasury. There is the balance of payments to be considered, there is the incomes policy and social justice to be considered, and there is, above all, the new drive to bring that efficiency and competitiveness to British industry which the Conservative Government in their 13 years totally failed to achieve.

7.49 p.m.

Sir Herbert Butcher: I am sure the hon. Member for Lincoln (Mr. Taverne) will forgive me if I do not follow him entirely by mounting a full and elaborate attack upon the Government he has defended with so much gusto and vigour. I prefer to direct the attention of the House more to some of the problems in the Finance Bill.
First, I should like to pay a special tribute to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) on his maiden speech. Sir James Duncan was a personal friend of mine. I co-operated with him happily for 27 years in the House, and I hope that the hon. Gentleman will have as happy a time and create for himself the same reputation as Sir James did.
In the years that I have been in the House, I have heard about 30 Second Readings of Finance Bills. I cannot believe that any Finance Bill has been so unnecessary and so damaging to the national economy as this one. If the House will bear with me, I shall give some of the reasons why I believe it will do most substantial damage, not in all fields, because that would trespass too much on the time of the House, but in terms of housing.
Before I pass to housing, may I say that when the Chancellor this afternoon


used the phrase "rephasing capital investment" and I listened to the hon. Member for Lincoln making his passionate defence of the Government, I wondered whether, if he paused to think about this phrase "rephasing capital investment", clearly and definitely interpreted, he realised that it means fewer orders for the engineering works in the City of Lincoln, because that is what happens when capital works are delayed.
In his speech yesterday, the Chancellor said that he was considering whether some means can be found of mitigating the severity of the increase in the Bank Rate on housing. I would ask whoever is to reply on behalf of the Government to be so good as to amplify this subject. There is no doubt at all that by their measures the Government have dealt a terrible blow at housing the people. An hon. Gentleman opposite says "No". Perhaps he will do me the courtesy of following my argument for a moment and say "No" if he still disagrees with me when I sit down. I will take the point straight away. This afternoon I put a Question to the Minister of Housing and Local Government as to the increase in the cost of the ordinary council house as a result of the surcharges. The Parliamentary Secretary gave me an answer saying that the cost on a local government house would be between £20 and £50. Let us carry that further. The capital cost to local government has gone up on timber alone, to say nothing of tiles or of any other material subject to surcharge, or the resulting increase due to the increase in petrol, by about £50. That is the cost to the local authority. But when a house is built someone is going to live in it. The rent of that house will be increased, so that the increased cost of £50 capital cost can be serviced at the present penal rate of 7 per cent., which is £3 10s. on £50, equivalent to about Is. 4d. per week, irrespective of rates.
That is not the only question on which the Government are getting themselves into trouble. We now have to look at what is happening in the other fields of housing. Housing can be divided, like Gaul, into three parts: tenancy accommodation, council accommodation, and owner occupied accommodation. What is to happen to houses which a re in the hands of private

owners? I remember very well the visit of the right hon. Gentleman who is now First Secretary to my constituency when he spoke with great vigour and enthusiasm in the market places of Boston and Spalding, with very little difference to the result of the election I am happy to say. But there he was dealing with the question of lower mortgage rates for the people of this country. How is it to be provided? Are we to have subsidies from the Government to the local authorities so that the tenants' rates will not be increased? Are there to be similar subsidies to the building societies?
I should like in this connection to read to the House a quotation from the Daily Telegraph of 27th October, 1964, which, of course, was after the General Election. It stated:
Mr. Lewis Cohen, a friend of Mr. Brown, reported yesterday that net investment in his £130,000,000 Alliance Building Society … the six largest in Britain, had fallen from £500,000 a week to half that sum"—
that was when the Conservatives were in office—
Mr. Cohen is a Government supporter and former Labour candidate. He is one of the leading advocates of higher interest rates for investors. He said: 'There is a general feeling that 3½ per cent. is not enough to attract investors. They will have to be offered better rates and, of course, it will mean higher mortgage rates'.
That statement was made on 27th October when the Bank Rate was 5 per cent. Since then the Bank Rate has been increased by 2 per cent, and it is very difficult to understand how, if Mr. Cohen was right at that time, it can be possible to keep the rates as they are.
To be quite fair to Mr. Cohen, I will give another quotation, cut from page 2 of the Daily Express today:
Mr. Lewis Cohen, head of the £130 million Alliance Building Society, said: 'It is vital that building societies preserve the good will of the Government. We should take it easily for a time and not take any immediate steps to increase our rates. People are frightened of the Stock Exchange and investment unit trusts have taken a nasty beating. So I think we should leave things as they are. Money has been coming in faster in the last month. It would be a terrible mistake to put up our lending rates now'.
That is Mr. Cohen on 27th October and Mr. Cohen today. You pays your money and you takes your choice! But what is the policy of the Government in regard to building societies? It is


entirely ambiguous and needs clarification. When we think of the large number of owner occupiers in this country—42 per cent. of the houses occupied by their owners—they are entitled to some indication at once as to the Government's policy. The Government will be gravely failing in their duty if they do not make that perfectly clear during the course of the reply tonight.

Mr. Cyril Bence: I am an owner-occupier myself, and in 1951 the interest rate on my mortgage was 4¼ per cent. Six weeks ago it was 6¼ per cent.—and the hon. Gentleman's party had been in power for thirteen years.

Sir H. Butcher: The hon. Gentleman very wisely at that time bought a house which has given him very substantial capital profit. If he had bought Dalton Bonds at that time he would have sustained a very heavy capital loss.

Mr. Bence: Thirteen years of inflation under the hon. Gentleman's Government.

Sir H. Butcher: The hon. Member said inflation under our Government. I am not here to defend that. All I would say to him is: point to any other Government in Europe that has successfully mastered inflation; and, equally, point to any other Government that has done as well in recent years as the Government which was in office until October.
Let us examine the position of building societies. The rate at present being paid by the ordinary borrowing member is 6 per cent. Out of that, £3 10s. is paid to the shareholder and, on the whole, it is building society experience that two ordinary lenders service the loan for one ordinary borrower. Then 33s. is payable in tax. The cost of management averages 11s. There is, thus, a margin of only 6s. It is on that margin that I invite the hon. Member for Dunbartonshire, East (Mr. Bence) to concentrate for a moment.
Before the election, there was an interchange between the Prime Minister and the Chairman of the Building Societies' Association. It was somewhat ambiguous, which does not surprise those of us who have been in the House with the right hon. Gentleman. What has happened since? The composite rate has

been increased by 5d. in the £. The rate of taxation has been announced as being increased from 7s. 9d. to 8s. 3d. The Postmaster-General has indicated that postage charges will be increased. Where is the surplus to come from which will enable building societies to continue to make their loans, for the amount they must place to reserve is specifically laid down and is under the control of the Registrar of Friendly Societies?
I believe that the Government's actions so far have dealt housing a heavy blow. It is usual in this House—I have done it already on several occasions—to indicate one's interest. I am a director of building societies. Following spurious promises which the Government made to win votes, people are now waiting for those promises to be implemented. People believe that new borrowers or young people borrowing for the first time will be able to secure loans at particularly favourable rates. Is that so? A vague silence has fallen on the Government in this respect.

Mr. Bence: It would be better to judge at the end of a four-year Parliament.

Sir H. Butcher: We are not arguing about four years. It is not so long ago, so rumour tells me, that there was a meeting between representatives of the Government and representatives of the building societies because the Government were so anxious that the measures they were taking would make it absolutely essential to allow building societies to increase their rates. Perhaps whoever is to reply will be able to tell us whether there was such a meeting. If there was, who was there? Was the Treasury represented? What was the decision? We are entitled to have the answers to these questions.
It is all right for the Government to try to goad us. We did not say that we would make a new Heaven and earth in 100 days. To be fair, the Government did not say that on the 38th day they would slam Bank Rate up to 7 per cent. But the people are entitled to know where they stand with regard to their housing.
I had it on the highest information this morning that, because of the Government's uncertainty in dealing with housing, there are houses at a price well


within the normal means of ordinary working people—by and large I mean, houses under the £4,000 level—which are standing idle and empty because there are no buyers.

Mr. Bence: Where is this?

Sir H. Butcher: I shall not say where, for I do not want it on public record. I will tell the hon. Gentleman privately.
There is uncertainty. The Government came into office with a target of 400,000 houses a year. If the Government are not careful in handling this question of owner-occupiers and the local authorities—which are as much in the dark as building societies—they will fall short their target. I have seen many Finance Bills, but of all the unnecessary ones and those calculated to do damage and create difficulty for the ordinary people, this is the worst. There is only one consolation. As the Chancellor of the Exchequer said yesterday, foreign speculators have been hurt. I think that that is right and that these gentlemen should share the discomfort being inflicted on the ordinary people of this country.

8.6 p.m.

Mr. Joel Barnett: My hon. Friend the Member for Ashfield (Mr. Warbey) made the point that the country was temporarily insolvent. We should make clear as quickly as possible to the country and to the world that Britain is not insolvent, temporarily or in any other way. My understanding of the word "insolvent" is a situation where liabilities exceed assets and, to the best of my knowledge, that is not the case with this country.
I do not want to say much about the speech of the hon. Member for Holland with Boston (Sir H. Butcher), because it was almost wholly irrelevant. He referred to housing in the context of a 7 per cent. Bank Rate. His argument would have been relevant only if the level of 7 per cent. were permanent. But he must know that this level is a temporary expedient.
The hon. Gentleman was at pains to point out to my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) that he had made a fine capital profit on his house since 1951. He forbore to mention also that, if my hon. Friend had to replace that house today by another, he would certainly not have a capital profit.
The hon. Gentleman also referred to the fact that some working people cannot buy houses below £4,000. I find that statement somewhat astonishing, as will the working people and the middle classes of my constituency, who certainly cannot afford a house at £3,999.
One point was particularly revealing in the speech of the right hon. Member for Barnet (Mr. Maudling). He said that money spent on giving extra to old people and to the sick was inflationary. I accept this. But the whole purpose of his argument would seem to imply quite definitely that, if the Opposition had won the election, the old and the sick would not be getting the rises they are to get. I should like to hear from the Opposition Front Bench whether or not the Opposition would have given these increases.

Mr. du Cann: It is good of the hon. Gentleman to give way so courteously and to allow me to reply to that point immediately. We had a very good record in this matter and should have been proud to continue it.

Mr. Barnett: That does not reply to the point at all. If the right hon. Member for Barnet meant what he said, it clearly implied that the Opposition would not have been making these increases now. It is possible that they might have been intending to make them in two or three years' time, but the implication of the right hon. Gentleman's speech, and, indeed, of every speech by right hon. and hon. Members opposite, is such as to make it clear to old people and to the country at large that no such increases would have been forthcoming at this time.
I should now like to refer to the Bill which, I believe, we are discussing. The first item in the Bill is Income Tax. I have found it somewhat surprising, and I know that other hon. Members have, that in our mailbags and conversations with constituents we have had little complaint about the 6d. increase in the standard rate of Income Tax. Is this surprising, or is it that we have underestimated the social conscience of the people paying tax at the standard rate? I believe that it indicates that, unlike right hon. and hon. Gentlemen opposite, the country wants to see our old people have a reasonable increase over the meagre amount which they have been getting.

Colonel Sir Harwood Harrison: Hon. Members on this side of the House


represent a good many people in the country to whom the hon. Gentleman is referring and who are not separate from the people represented by hon. Members opposite.

Mr. Barnett: Perhaps the hon. and gallant Gentleman will bear that in mind in his recommendations to his Front Bench about how the Budget can be balanced by voting against the amount required to pay for these increases in old-age pensions. Perhaps he is not representing his constituents as well as he might.
Although it is the most progressive way in which we can obtain the money we need, I am concerned about the disincentive aspect of increasing taxation. There is a psychological effect in increases of this sort, although the amount is comparatively small. For example, taking a figure which will be reasonably well known to hon. Members, a person on £3,250 a year, with £1,250 a year expenses, who has a wife and two children and who has a mortgage of about £3,000 and a little life insurance, will pay approximately 3s. 6d. a week more. This increase of 6d. in the standard rate will not have a very great effect on people who can ill-afford it, but I am concerned about its psychological effect, especially on those who are not prepared to work overtime, feeling that the extra few pound they earn will be taxed very heavily.
I have described this as a psychological effect because it often is only a small effect, in fact. A person paying tax at reduced rates of 4s. or 6s. and working on a Saturday morning to earn an extra £2 or £3, will pay only a comparatively small amount of extra tax; but there are many who will not work this overtime—and I have had this put to me quite forcibly—and who ask why they should pay tax on all their overtime when so much evasion and avoidance is going on.
Despite the demands made to me, I know that there is no administrative possibility of removing tax from overtime earnings, but I would like the Government to bring in lower rates of tax, or to increase the present amount of £200 taxed at 4s. and the £200 taxed at 6s. so as to give further help to those who most need it. It is vital to find a

way to give incentives to those to whom we need to give incentives, that is to say, those whom we need to work overtime in areas where there is a shortage of labour and where businesses and industries find it difficult to get the production which they need and the goods which they need and which they can sell at home and abroad. It is this sort of incentive for which we should be looking.
There has been a great deal of discussion about the surcharge and most of the points have been made ad nauseam, but it must be clear to hon. Members opposite that whether the deficit on our balance of payments this year is on capital or current account, the money has to be found now. It is no use saying that there are so many hundreds of millions of pounds of our deficit this year on capital account and, therefore, not recurring. Of course that is true, but it is equally true that we have to balance our balance of payments account this year. It is no good saying that it would be better another year when we have to deal with the problem now.
All the most important points were made by my right hon. Friend the Economic Secretary to the Treasury when winding up the recent debate on this issue. It is quite clear, and I accept, that the surcharge is made for emergency reasons and that it will come off as soon as possible, but there are one or two matters which I want to put to the Chancellor of the Exchequer.
First, I was not satisfied with his argument that goods which cannot be obtained elsewhere should not be put on the exemption list. It is clear that we are putting on the surcharge only for balance of payments reasons and surely goods of this kind should be exempted. Equally, goods contracted for and des-patched should also be exempted, because otherwise this is a sort of retrospective legislation which falls hard on small companies which could be made insolvent by this legislation. I should like my right hon. Friend to look into that.
I do not want to seem churlish about the export rebate, for I am delighted with any kind of export incentive. However, a client of mine recently asked me how much he would get. He was a


reasonably intelligent fellow who had read the Bill. I must admit that I had some sympathy with him. Clause 7(1) refers to the amount
incurred in connection with the production, manufacture or carriage of goods …
Precisely what that meant to this man with a comparatively small business was not clear and was not made any clearer by subsection (2) saying:
… the applicant shall be entitled … to
obtain from the Commissioners a rebate of the amount prescribed …
He was not clear what that amount would be for him and subsection (3) did not make it clearer by saying:
The amount so prescribed shall be ex-pressed as a percentage of the export value …
We need an incentive for those small companies which are falling behind in the export drive. Under Clause 9, small companies will have to submit themselves to all the rigours of inspection and investigation by Purchase Tax officers. Feeling that they will get only a comparatively small amount of rebate, they may feel that that is not worth the bother. The bulk of the £75 million may, therefore, go to companies who will simply pocket it without attempting to regard the money as an incentive to increase exports.
Much can be done in exports without enormous expenditure on the part of the Exchequer, but we must have a completely new approach. We must make the exporter a V.I.P.—a very important person. He must have prestige status. He must be given maximum Government publicity. We should have a gold medal, perhaps, for the exporter of the year, special car badges to show that the person in that car is an exporter, and priority through the Customs.
I have had brought to my attention the problem of one exporter in particular who not long ago went to Paris and collected some goods which he wanted to bring here to look at with a view to manufacturing them for his company for export. To avoid hold-up at the Customs he said, "I will pay duty on these goods." The Customs officer eventually said, "You do not need to pay duty because you are not going to use these goods." He said, "Thank you very much. I will not pay the duty, as long as I am not held up. I have another plane to catch". In fact, he was held up and he did miss

his plane, but he did not pay the duty on that comparatively small amount of goods.
Months later, when he was at his works, he received a telephone call. The person at the other end said, "Have you got those goods which you brought in free of duty, or have you used them?" By that time he did not have the faintest idea where the goods were. He was told, "We will have to come and investigate to see whether they are still with you, otherwise we will have to charge duty". He said, "Charge me the duty. Just leave me alone". However, this was not to be, and people came along, investigated and made a tremendous fuss. Eventually, they said that he did not have to pay the duty.
The problems for people passing through the Customs are rigorous, and rightly so in many cases, but we should be trying to help the exporter. In fact, we are not. Many Customs officers are fine, courteous men, but, unfortunately, there are many who think it their duty to be arrogant, cynical—[HON. MEMBERS: "Nonsense."] Any hon. Member who goes through Customs must know that there are officers like this. As I say, in the main, they are a fine body of men, but there are some who seem to take particular pleasure in being awkward.
If we want to make the exporter's job easier, and to give it more prestige, we must raise his status. We talk too much about helping companies to export. We tend to forget that it is not the company doing the exporting, but a person in the company, who is faced with all the difficulties which exporting entails. Some of them are financial difficulties and some are language difficulties. When a managing directer, director or salesman has a night out with a client in this country, it is much more pleasant because he can speak the language. But when he goes abroad and cannot speak the language, allied to the other difficulties, he often says, "It is not worth the bother", and does not go.
I should like the Board of Trade to make available much more readily the assistance of interpreters, perhaps glamorous interpreters. If we want to glamourise the job of exporting, let us do it properly. Let us have a regular weekly T.V. panel. [Laughter.] This is a very serious matter. There is nothing


more important in this country than that we should have the maximum exports. We must, therefore, give the maximum publicity, not to export companies, but to the people doing the exporting. Unfortunately, we do not make enough fuss of our exporters.
Turning to the Budget as a whole, I know that in terms of economics it balances on the right side. The Chancellor has, therefore, shown that it is not inflationary. But it has created, to some extent, an inflationary climate. [HON. MEMBERS: "Hear, hear."] It is no use hon. Members opposite saying "Hear, hear" and then going on to make the sort of destructive criticisms which we have heard from them, because it does not help sterling or the British economy, and, in the long run, it will not help the Conservative Party.
The reason why I say that there is some degree of inflation—we must accept this unpalatable fact—is that too many people have already taken advantage of the situation which exists. Only last weekend at home in Lancashire I found that spinners were increasing their prices. Whereas, previously, businesses selling to mail order, for example, had difficulty in raising their prices an extra copper, now they were able to increase their prices an extra 2s. because of the general climate. If a manufacturer increases his price by 2s., plus the Purchase Tax, to a mail order house which then puts on a 100 per cent. profit, it certainly has an inflationary effect.
Businesses are already increasing their costings to take into account the National Insurance stamps increase which they will not have to pay until next April. This is what I mean when I say that an inflationary climate has been created. I do not say this in any spirit of carping criticism. We had to deal, first, with a situation which was not of our creation but our inheritance, and, secondly, to give an increase to pensioners who did not deserve to wait any longer. Pretty well any action which we might have taken would have had inherent difficulties, but I hope that the Government will not allow themselves to be misled simply by the statistics.
The trouble is that a degree of uncertainty exists in the minds of businessmen, and not just those in the City. It existed

before my right hon. Friend's statement about the capital gains tax, and I was glad to hear him clarify one point on that matter. The City and businessmen generally naturally are not pleased with paying more tax, but they would more willingly pay more tax if they knew the worst which was to befall them and if we could make it clearer to them how the corporation tax, for example, will work.
This is not easy, because it cannot possibly start until 1966–67, because we have to change the whole basis of taxation from the preceding year to the actual year, but if we can make it a little clearer in its workings, without saying what it is to be—whether 40 per cent. or 42 per cent., or anything else—this will help. At the moment, there are far too many people busy upgrading their assets, so that by April of next year, when the capital gains tax starts to work, it will have as a base a pretty high value.
Perhaps one should warn them that the difficulties which were always envisaged in deciding on values for a wealth tax might well prove irresistible now to a Chancellor who sees the valuations placed by many companies and individuals, both, that is, for a wealth tax and, possibly, a capital levy. But, of course, businessmen are aware of all these possibilities and, like it or not, these thoughts are occupying their minds to the exclusion of the expansion of industry. I would like to see the Chancellor, at least to some degree, removing some of the uncertainty, so that we can get on with the job of expansion in industry that we so urgently need.
Like all Members, I passionately want to see all sorts of money found. I want to see money found to increase and improve our educational system so that it can be one of which we can all be proud and which our young people deserve. I want to find extra money for our old people so that they can have the pensions they deserve after working all their lives to create the economy we have today, but all these things are so much pie in the sky unless we have a soundly based economy. In general terms, I believe that the Government have started along the right lines but I hope that they will take cognisance of some of the remarks which I have made.

8.31 p.m.

Mr. W. J. Biffen: The hon. Member for Heywood and Royton (Mr. Barnett) touched on a great many points in his Speech and I hope that he will forgive me if, at this late hour, I do not follow him in all of them, except to say with charity how much I agree with some of the points which he made, especially those about excluding from the list for the surcharge those manufactures which cannot be reproduced in this country, and also to say that I agreed with him when he said how desirable it would be to know more about the Corporation and Capital Gains Taxes. I agree with him in hoping that we may have a White Paper on this fairly soon.
This debate on the Second Reading of the Finance Bill falls, unhappily, under the shadow of a considerable amount of international speculation on sterling. This, as has been pointed out, is no new thing for sterling. This was pointed out in an admirable maiden speech by my hon. Friend the Member for Horsham (Mr. Hordern), who underlined the, great vulnerability this country suffers in this respect. It is something with which we live, but we are very proud that we should be at the heart of the sterling area and we hope that it would remain so.
This leads me to make a little analysis, I hope not unpatriotically, of why I, think that some of the speculation has reasonably arisen. There have been a number of suggestions that somehow or other the international bankers are such a naïve bunch that they have to have their eyes opened and their hands held by speeches made in this House. I have never subscribed to that view. I think that they are quite capable of making their own assessments of the economy and I think that they have done it without the advice of any speeches made here or by politicians in the country.
Therefore, my doubt about all this springs from a belief that the international bankers were not immediately convinced by paragraph 7 in the Government White Paper of 26th October. Although it has been quoted once already this evening I will, at the risk of boring hon. Members, repeat it. It is the paragraph which said:
The Government further examined the domestic economic situation. Apart from

special problems of individual areas and a limited number of industries, there is no undue pressure on resources calling for action. Moreover, the Government reject any policy based on a return to stop-go economics.
It would be as well to know whether that is still the Government's view. Hon. Members have received that remark with silence, as though they may have some doubts about it, but when my right hon. Friend the Member for Barnet (Mr. Maudling) quoted this paragraph earlier this afternoon, there were some murmurs opposite suggesting that that was still the Government's view. If it is still the Government's view, then I say frankly that it will not go unnoticed by those outside the country.
My second question is whether the 7 per cent. Bank Rate is meant to operate as the 7 per cent. Bank Rate did on previous occasions. I am sorry that the hon. Member for Lincoln (Mr. Taverne) is not in the Chamber. He is a great friend of mine and is, indeed, my pair. He said that this is not the old mixture; this is 7 per cent. with the effect on the domestic economy moderated, and the domestic economy is to be insulated against the effect of 7 per cent. That was also the view expressed on television last night by the hon. Lady the Member for Hitchin (Mrs. Shirley Williams)—I am sorry that she is not in the Chamber—and the hon. Member for Stepney (Mr. Shore), as my hon. Friend the Member for Taunton (Mr. du Cann) can confirm, for he appeared on the same programme, against a background of London buses.
I gather from what has been said that this is not the old 7 per cent. This is 7 per cent. which will not operate through the domestic economy. Doubtless, rural lambs that they are, hon. Members opposite were thinking of the swampy speech made by the Prime Minister earlier this year when he referred to the possibility of higher interest rates. He said:
If this weapon had to be used as a means of operating on hot money, we should not—as in 1960 and 1961 and, of course in 1956–57, force on the nation a structure of high longterm rates with all that that means for investment. And we should take special care by the use of the two-tier interest rate structure we have proposed to ensure that local authorities get capital for housing, at rates which represent the power of the Government to borrow.


If hon. Members opposite believe that the 7 per cent. Bank Rate is a different animal from the 7 per cent. Bank Rate on previous occasions, they should say so. Certainly, the Government in answering the debate tonight should say so. Quite frankly, I think that the more they placate hon. Members on their back benches, the more they will raise doubts among international observers.

Mr. Bence: Mr. Bence rose—

Mr. Biffen: I hope that the hon. Member appreciates that I am trying to gallop through this speech because other hon. Members may wish to take part in the debate.
There has been much talk about bringing forward the date at which the increased social benefits will be paid. I say, frankly, that if tomorrow a statement is made that there will be a meaningful increase in the incidence of social benefits as a result of the date of their payments being brought forward, a great many people, not merely in this Chamber but in the world, will wish to see what are the compensating factors on consumption which will be levied at the same time. I am afraid that that is one of the unhappy facts of life, and it is as well that it were said, even though it is unpleasant and there is no particular political advantage in saying it.
Following the comment of the hon. Member for Lincoln, may I turn to the question of the import surcharge in Clause 2 of the Bill. I fully accept the Chancellor's argument that the surcharge, as opposed to a quota limitation, had advantages even though it broke the rules. What I cannot accept is the degree of complacency which somehow seems to affect some of the speeches by hon. Members opposite when discussing this surcharge. Whatever may be held against the quota, at least it was a fairly definable instrument. The surcharge is a system of import limitations, but I very much doubt whether the sums have been worked out very effectively as to the likelihood of the surcharge restraining imports.
I say this because almost every day one reads in the financial Press that various companies say that they intend to absorb the surcharge in order not to dislocate the sales network which they

have built up over recent years. If I may take just today and yesterday in the Financial Times, in those two days I.B.M. said that it had no intention of increasing the price of their computer and that it would absorb the surcharge on it, and part of the surcharge on its other office equipment. Trelleborg, the Swedish Power Company, said that it would absorb the entire surcharge and not pass it on to the customer unless it remained in being a long time. Thirdly, Grundig said that it intended to absorb the whole surcharge on its range of office equipment.
The point which I make is that we are constantly being told that it is the Government's objective, which I certainly welcome, that the surcharge shall be removed as soon as possible. But if this is so, and is understood to be so by foreign suppliers, the advantages of their absorbing the surcharge are correspondingly increased.
If this happens a good deal of the figuring behind the original announcement of the surcharge may have to be revised. For this reason I ask, in a constructive spirit, just what are the feelings of the Government, on the evidence so far laid before them, of the intentions of our importers to absorb the surcharge?
I turn to another point which is related to the surcharge, the real suspicion that must exist abroad that there is a protective element in the surcharge. This has been denied by the Government, I am delighted to say, but it would be less than human for many people, particularly foreign observers, to suspect that they have in this Labour Government a protectionist Government. I say that because if one considers the Swansea speech of the right hon. Gentleman—and I regard it as admirable foresight on my part to have obtained a release of it from Transport House, because it has provided me with much solace ever since—one sees that the Prime Minister, sneaking when he was Leader of the Opposition, said:
I would particularly stress the need to develop import saving industries. This should be tackled with at least the same urgency as the exports drive.
Anyone who speaks in that sort of language, and who heads a Government having done so, must expect to find every action of that Government being analysed in the light of those sentiments.

Mr. Robert Maxwell: Does the hon. Gentleman appreciate that the action of an exporter like I.B.M. in absorbing this amount, thereby reducing its own profit margin, means that the exporter is not only taking a good action which benefits his customers but is also doing something to benefit our balance of payments?

Mr. Biffen: No interruption from the hon. Member in a Tory speech would, I suppose, be like Coronation Street without the commercials. I see his point, although I am sure that some of my hon. Friends would dispute it. Indeed, it is interesting to note that the hon. Member for Buckingham (Mr. Maxwell) said recently:
Surely the result of the 15 per cent. Surcharge will be that some imports will be produced in factories in this country and therefore will not be required."—[OFFICIAL REPORT, 11th November, 1964; Vol. 701, c. 1086.]
This is protectionist thinking because, on the whole, if that is the result, then undoubtedly a great many foreign countries will say, "In view of the words of the Prime Minister—now apparently backed up by this unofficial voice, the voice of the hon. Member for Buckingham, from below the Gangway—this adds up to protectionist elements in the economy." I cannot think that such a remark would be endorsed by the Government in the cool evening tonight, but it is a danger and the sooner the Government make it clear that the surcharge is to be as temporary as possible, and is to have no protective element in it, the happier everyone will be.
My criticism, particularly of the Finance Bill, is that, perhaps inevitably, it contains no long-term remedies. I am doubtful of the efficacy of the surcharge, although I accept that as being probably inevitable in the situation. I hope that we are not going to overcome our difficulties, at least to our own possible satisfaction, by saying that so much of this can rest on the successful implementation of an incomes policy. Sooner or later someone on the Front Bench opposite will have to say that an incomes policy is a lot of nonsense.
I believe that it is unattainable and, because it is unattainable, one should not attempt what one believes to be unattainable, for in the process one deludes

oneself with a great deal of nonsense, and this is likely to happen. Having said that, I realise that I have given hon. Members opposite something that they can use in the future, but I have said it because I have a feeling that, in the long run, a great many people will come to the same way of thinking.
What is more, I am quite certain that a great many outside observers do not believe that an incomes policy is a practical proposition for the next 18 months, and that those who are seeking to insulate our economy and the nation's finances from speculative raids on sterling would de well to ponder what they believe to be the assessment of those people.
I therefore end by hoping that, as the long-term proposals of the Government emerge, they will be built around widening the areas of competition in the economy, because I believe that it is only with a considerable and significant widening of the areas of competition in the economy that we will be able even to begin to put into effect some of the long-term remedies that are so necessary.

8.46 p.m.

Mr. David Ensor: If I may say so, nobody is better informed in self-delusion than hon. and right hon. Members opposite. I remind the House that last week we heard a speech by the right hon. and learned Gentleman the Member for Hertfordshire, East (Sir D. Walker-Smith) which was very witty, very clever, very amusing—very dilettante-ish—but, as a major contribution to political argument, entirely futile. The fact is that since 15th October the Conservative Party has been giving us reasons, statistics and figures as to how it lost the election. As an exercise in mathematics, it is entirely futile; as an example of whining in defeat, perfect.
The truth is that the arrogance and insolence of the party opposite in saying that it opposes our measures in order to save the country's financial situation is quite ridiculous. Let me remind the House of some of the figures of Bank Rate since 1951. Hon. and right hon. Members opposite speak of a 7 per cent. rate as though it were something extraordinary, but in 1954 the figure was 3 per cent. By 1957 it had gone to 7 per cent. In 1958, of course—the year before a General Election—it was down


to 4 per cent. Immediately after that General Election, of course, it went to 6 per cent., and by 1961 it was up to 7 per cent. We then started the process of bringing it all the way down the ladder again. I suggest that that sort of figure is the measure of the incompetence that we found there to have been in that Government when we took over on 16th October; the sort of figure of £800 million they landed us with when we set out to try and put the country back on its feet and to make, I suggest, an attempt to make the country great again.
The tragedy is that the Government of the day until 15th October knew perfectly well what the situation was. Hon. and right hon. Members were only too anxious to tell us from time to time, and the right hon. Member for Barnet (Mr. Maudling) and the right hon. Gentleman the Leader of the Opposition were only too anxious to tell the people, that all was well and that the economy was healthy and bouncing. We have heard it so often. We have heard it for the last 13 years. It is back to "You've never had it so good." We heard it for so long that some people even began really to believe it. One cannot, of course, say that right hon. and hon. Members were lying, but what they were guilty of was one of the worst terminological inexactitudes ever imposed on the people of this country—and they know it.
We have been in government a matter of a few weeks. I say without any qualification at all that it is an impertinence and insolence for hon. Members opposite to object to what we are trying to do when we have found such a fantastic situation left by them. They knew what had happened in the last two years and they knew perfectly well that they were putting off the evil day in the hope that something would happen. They put off the General Election in the hope, like Mr. Micawber, that something would turn up. This time it did not. One wonders what would have happened if they had been successful on 15th October. What would they have been doing now?

Mr. Geoffrey Hirst: Not putting Bank Rate up to 7 per cent.

Mr. Ensor: Why not? Hon. Members opposite did it twice before, why

not again? The chances are that they would have put it up to 9 per cent. This country can no longer afford to be governed by a party which has a mid-Victorian mind, with a leader in mid-Victorian spectacles and a mid-Victorian policy who had the impertinence to tell us during the election campaign that we had a menu with no prices. My answer is that they have not even a menu. All they have is yesterday's leftovers, not even heated up.
Having left the country in the fantastic financial situation which we found, as the Prime Minister said yesterday, having now read the books for the first time—the books which hon. Members opposite wrote in the terms of the Lower IVth at Eton, apparently not being able to write them in any other form—it is ridiculous for them to object to what we are trying to do to put the country back on its feet. In the terms of a great hon. Member of this House spoken a long time ago, we once "saved ourselves by our exertions and Europe by our example." Under the present Government we can do it again.

8.53 p.m.

Mr. Nigel Birch: I think I can at any rate congratulate the hon. Member for Bury and Radcliffe (Mr. Ensor) on having an exceptionally fruity voice. We have had a very large number of maiden speeches today; in fact the number of hon. Members who are no longer entitled to call themselves maiden speakers has almost reached Sabine proportions. I do not think it necessary to refer to them all, but we look forward to hearing contributions from them again in the future.
I think it right that this debate should concentrate on the general financial situation rather than on discussing the details of the Finance Bill, which we shall have time to do later. This is particularly important at present because, as everyone knows, there is a run on the £ going on. I have been at the Treasury when there was a run on the £ going on and, therefore, I have considerable sympathy with the Chancellor of the Exchequer. It is a very painful and distressing business.
The Prime Minister said yesterday that the pressure on the £ started only in the last few days. He very clearly implied that what was the matter was speculation. He has so often spoken about speculation


before that he may himself even believe that it is purely speculation in the ordinary accepted meaning of the term, that is to say, someone selling sterling in the hope of getting an uncovenanted benefit from doing so.
I think the right answer to this was given from the benches opposite by the hon. Member for Manchester, Cheetham (Mr. Harold Lever). What he said was absolutely true, that when we get this situation, the main pressure comes from those who want to avoid uncovenanted losses. May I explain what I mean by that? Take the situation before the last devaluation in 1949 when hon. and right hon. Gentlemen opposite were in power—a 40 per cent. devaluation. We can take two people, two importers in the sterling area, holders of sterling somewhere, anywhere, it does not matter. They buy goods in dollars. They feel nervous about the £. One of these importers says, "Well, look here, I must cover my transactions. I may borrow if necessary, but I shall buy dollars now." The other says, "I shall let it run." The first fellow who buys the dollars in advance may have to pay a little extra in interest, but he gets the goods he covenanted for at the price he intended to pay, whereas the other who did nothing has to pay 40 per cent. more than he covenanted for when he ordered the goods. Which of those is the gambler? I do not think that a simple question to answer.
So much of the world trade is conducted in sterling, and naturally people are frightened of devaluation and try to insure against loss. It works the other way round. I have been talking about leads, but there are also lags, people who buy goods from here and who will try to delay payment because if there is a devaluation they will get the goods more cheaply. Foreign companies operating in any country in the sterling area will try to remit home as much money as they can and try to delay buying sterling, and putting money into those sterling area countries simply because they think that if they wait they will get the sterling more cheaply. It is not really a question of "city slickers" gambling, although no doubt people do gamble. These are perfectly legitimate commercial transactions. If we simply talk about gambling in those terms we are deceiving ourselves and under-

estimating the problem that we have to face. I think this is a point which we ought to make very clear.
I am glad that the Government are prepared to fight for the £. I have been deeply shocked sometimes by the lightness with which people talk about devaluation. There was what I thought a perfectly scandalous article in the Observer last Sunday, which simply said that whatever we did we must not cut down growth. There was no mention of the moral factors at all.
The truth is that we are bankers. The French have had eight devaluations since the war and, in order to make any sense of their currency, they had to divide it by one hundred. But they are not bankers. We hold the reserves of all the countries in the sterling area. What would the Astors, who own the Observer, do if their money was in a bank and they thought that the bank would pay only 17s. 6d. in the £? They would have the money out pretty quickly.
Why, in the words of the Prime Minister, has this sudden speculation in the £ started? How sudden it really was I do not know, but I think there are certain reasons, both psychological and material, which have led to the present position. The first one, and it is mainly psychological, is the way in which the Prime Minister fought the Election. I made this point in a number of speeches during the Election. Unfortunately, I was not as happy in my publicity as was my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg) and my speeches did not get reported in the national Press. The point which I made again and again was that it was disastrously dangerous for someone who aspired to be Prime Minister to cry "Stinking fish" about sterling while at the same time advocating a policy which would vastly increase expenditure and taxation and sink a currency much stronger than ours. It made no sense, and people would think that here was a man who did not believe in his own currency and wanted to do things that would sink it. I do not doubt that that had a great effect.
There is another point which I do not think we should under-estimate. Hon. Members opposite are so very insular. Their passion for tinned salmon and vinegar understandably blinds them to


what goes on abroad. In some foreign countries any Minister taking over office brings with him from outside the civil service somebody generally described as a chef de cabinet, somebody who knows something about the office taken over, a man full of ideas. This does not generally happen here, but it happened on this occasion.
Who did the Chancellor of the Exchequer pick as his chef de cabinet? He picked somebody who has been a passionate advocate of devaluation in public for the last two years. Everybody in Europe knows about Mr. Kaldor and his views. I cannot think that it was very wise to do that. Such things are noticed and they cannot be just laughed off.
On the purely psychological side, I was staggered when I read in my newspaper on Friday or Saturday that the Chancellor of the Exchequer is not to be on the Council or the reconstituted N.E.D.C. This is staggering, because It means that our global planning is to be done without any reference whatever to ways and means. It may well be that the Chancellor of the Exchequer and the Minister of Economic Affairs get on very well together; they may cling together like the babes in the wood. But what this means to anybody who knows anything at all about Whitehall is open but undeclared war between the Treasury and the Ministry of Economic Affairs. It is a rule in Whitehall that any established Ministry—there is no more well established Ministry than the Treasury—will always beat any new Ministries. I do not doubt that the Treasury will in the end win. The person who will go to the wall is the unfortunate first Secretary of State, but the battle may be long and the carnage terrible. It is folly.
Turning to the material side, the Budget was and is inflationary. Everybody in the country who knows anything about it and everybody abroad thinks that it is. Combined with stopping modernisation on the railways and restarting rent control, it indicates a return to the high consumption, low investment, fuddy-duddy economy we had in 1945. That has unquestionably done a lot of harm.
May I say something about the surcharge. [HON. MEMBERS: "Certainly."] I do not want to go into the question

of the ineptitude with which it has been handled, because that has been perfectly staggering. I object to it, not only because I think it will put costs and prices up here; I object to it on principle. I believe that it was absolutely wrong to break the agreements which we have broken, to break the E.F.T.A. Treaty, to break the G.A.T.T. agreements, and, in effect, to break our agreements with the Commonwealth. It was wrong on principle.
I do not think that it is worth while doing it for what we will get out of it, because when the Foreign Secretary and the President of the Board of Trade were beaten up by the E.F.T.A. countries as far as I could make out they more or less gave an indication that the thing will be off almost before it is on, in a few months. If they do that and that is the intention, hon. Members opposite by putting it on have "gone to sea for nothing but to make themselves sick." They have broken all our agreements for nothing. That is what happened.
What have we done? We have annoyed the Six. We have annoyed the Seven. We have annoyed many other countries—Spain, Southern Rhodesia, South Africa, most countries in the Commonwealth. We have annoyed them all by breaking our agreements.
It is all very well to take this breaking of agreements lightly, but there was an admirable Swedish cartoon reproduced in The Times a few days ago. The caption was "England expects that every other country will do its duty". That is the expectation, and we saw it clearly when the Prime Minister was talking about Simonstown and said, "Ah well, there is no provision in this treaty for it to be broken by one side unilaterally". That degree of hypocrisy is very depressing, and what we are losing is our good will, and good will is the product of the modest years.
I have talked to exporters and they say that in general in the past, all things being equal, people on the Continent have liked us and trusted us, and tended to give us the preference, but now we are at the bottom of the list. The only people with whom we are well in and to whom we can export unlimited goods are people in those countries where they do not have the money to pay us.
As for a wages policy, I very much agree with what my hon. Friend the Member for Oswestry (Mr. Biffen) said. The Chancellor of the Exchequer in his Budget speech very rightly said two things. One is that if one could get a wages policy it would be a great prize. We all accept that. Secondly, he said that no other country in the free world had a wages policy that worked. At the same time, both in his Budget speech and still more in his Bank Rate statement yesterday, the right hon. Gentleman made it perfectly clear that while no other country has a wages policy he was banking on getting one.
Are the circumstances really propitious at present to get a successful wages policy. In November unemployment was from 1·5 per cent. overall down to 0·7 per cent. in sonic of the key areas and, as a result of the demand for labour being greater than the supply in so many areas, we are having wage drift operating very actively. It takes various forms; there are special overtime rates and sometimes extra fringe benefits, and there are, especially in the building industry and in agriculture, much higher rates than the negotiated rates being paid. This is going on all over the country. On top of that the Labour Party clearly instructed Lord Devlin and his Committee on the docks dispute to settle at best and he reached a settlement which was grossly inflationary.
Can it really be supposed that in these circumstances we can get something which no other country in the free world has ever got? It seems to me that the Chancellor is saying, "Tomorrow I shall he absolutely solvent, but I want it to be clearly understood that there is one condition to this. My outsider must win the 2.30." This, of course, was the basis of all Socialist planning during the 1945 Government and this is what we are returning to.
Finally, is there or is there not overheating in the economy? As my hon. Friend the Member for Oswestry pointed out, in their White Paper the Government said that there was no overheating in the domestic economy. My right hon. Friend the Member for Barnet (Mr. Maudling) was of the same opinion before and during the election and most of the Press is of the same opinion now. I personally think that there was some

overheating before the election. There certainly has been since, and with this most inflationary Budget and with wages simply racing up after the dock settlement I would say that there was overheating. There are quite a lot of people, including some very reputable economists, who take the same view. Professor Alan Day, who, I rather think, is a Socialist, Lord Robbins and a good many others believe that there is overheating in the economy.
If the Government do not believe it, why on earth did they raise Bank Rate to 7 per cent.? They will not attract much foreign money by so doing, and the only effect of raising Bank Rate to 7 per cent. is to increase the interest paid on money deposited from abroad. We shall have to pay higher interest. The only point of doing it is to try to slow down the activity in our economy, but, having done it, presumably with that object, if the Government then undo its effect by special interest rates and so on, we shall be much worse off than before.
Most countries of Western Europe have had to do a certain amount of slowing down. Italy, France and Holland, for instance, have done it pretty successfully. We have had to do it several times. I really think that all the talk about "stop and go" ought to be ended. What we are doing now is driving a vehicle down the road, assuming that there are no bends and no traffic lights. One cannot do that sort of thing. One has to adjust one's economy, keeping employment full but not over-full and keeping prices reasonably stable, and either accelerate or decelerate as necessary.
If the Government go on pretending that there is no overheating in the economy, they will get into very serious trouble. I do not believe that what they have done so far will work, particularly if they undo such benefits as we might expect from the Bank Rate. Pressure on the £ will continue. We may have devaluation, and then we shall have to decelerate very hard indeed. But by that time, of course, the public will be sick of it and sick of the Government. There will be Kaldor riots which may well lead to the burning of Ministers' houses in Hampstead Garden Suburb.

9.13 p.m.

Mr. Edward du Cann: It is my happy duty, first, to pay a tribute on behalf of this side of the House to the seven maiden speakers we have had the good fortune to listen to today. First, we heard the hon. Member for Woolwich, West (Mr. Hamling)—he is not in the Chamber now—who, I thought, was fighting the election all over again. I fancy that that was the reaction of all who heard him. The hon. Gentleman certainly spoke remarkably and well.
My hon. Friend the Member for Dumfries (Mr. Monro) made a model speech and spoke from his personal experience in his constituency and in farming, and raised many practical points.
My hon. Friend the Member for Fermanagh and South Tyrone (The Marquess of Hamilton) spoke with great effect about his constituency and about Ulster, raising what I thought was a very controversial point when he said that his constituency was the most beautiful in the United Kingdom. Although we greatly enjoyed his speech, I feel that some of us would quarrel with him about that.
The hon. Member for Wellingborough (Mr. Harry Howarth) paid a most graceful tribute to his predecessors and spoke to great effect from personal experience about his constituency.
My hon. Friend the Member for Inverness (Mr. Russell Johnston), who represents, as he said, the largest constituency in Great Britain, who is certainly the most finely attired maiden speaker to whom we have listened today, made an admirably pointed speech and, if I may say so without presumption, spoke with an excellent lightness of touch, pricking us all on both sides very neatly.
I was particularly interested to hear my hon. Friend the Member for Horsham (Mr. Hordern), having lived for twenty years in his constituency which, I agree with him, is a quite exceptional place. He made a fine speech, with some practical points about liquidity and savings which were clearly and cogently argued. I am sure that all who heard him will agree in that opinion.
The same applies to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). I am sorry that I was able to

hear only part of his speech, but I am glad to note that he is as persistent historically as his predecessors have been on behalf of his constituency. He spoke with feeling on the subject of jute and put forward several practical ideas.
I know that I shall be expressing the opinion of the whole House when I say that the House of Commons will look forward to hearing all these speakers again and soon.
In his speech at the Guildhall the other night, the Prime Minister stated his
determination to keep sterling strong and to see it riding high.
I wish at once to answer the point which he made in the debate yesterday and say that we share that determination and objective. There is no difference between us on that point.
I agree with my right hon. Friend the Member for Flint, West (Mr. Birch) in what he said on the subject of devaluation. Talk about devaluation is stupid and foolish. Of course, the Government are right to do everything possible to defend the £. But this debate is really about a narrower matter, simply whether the Government's measures in general and the proposals in this Finance Bill in particular—that is to say, actual measures; we are not talking about theoretical measures—are correctly designed or are adequate to the purpose.
The hon. Member for Heywood and Royton (Mr. Barnett) did the House a service when he contradicted the wild and extraordinary assertions of the hon. Member for Ashfield (Mr. Warbey) to the effect that our economy is insolvent. Nothing could be further from the truth. The defences of sterling are extremely strong, particularly on the capital side. We all know the detail of this; there is no need to go over the matter in particular at this time. But what is plain is that the new Labour Government inherited a situation on the capital side which was more heavily reinforced than at any other time in our economic history.
I agree with the Prime Minister when he said yesterday that our resources are certainly adequate, if not more than adequate, to deal with the trade gap. But there is a problem in the trade figures. I want to put it in a rather different way to the House from the way


in which it has so far been put in the newspapers or in the House. Our exports were up 8 per cent. in 1963. So far this year they are up 4 per cent. on last year. It is about time someone in the House said that British exporters, on the whole, were doing a very fine job indeed. Why we all constantly, in the House and outside it, talk down our own achievements I do not know.
The problem arises because of the rise in imports, which so far are up about 14 per cent. Hence the trade gap. But there are special reasons for that. One is the question of restocking for expansion. That restocking, sooner or later, will earn us a bigger bonus in exports. The other is the stocking which took place pre-election, which no doubt was caused, in part at any rate—I think it fair to make this point—by some of the anxieties that manufacturers had as a result, as my hon. Friend the Member for Oswestry (Mr. Biffen) so correctly pointed out, of the suggestions made about what the Labour Party would do when it came into office if it came into office. To suggest that somehow or other there is something desperately wrong with our economy and the trading side is utterly and entirely false, and I repudiate it. We stand in a position of great strength, and we should state that clearly to the world at the conclusion of this debate.
What did the Government do when they came into office? They first deliberately over-emphasised the difficulties that we were in. We had the White Paper. We had the speeches of Ministers themselves. Goodness only knows, no Minister has come to the House to say what the President of the Board of Trade and the Foreign Secretary were saying in Geneva to the E.F.T.A. members. Many of us suspect that they were obliged, in order to defend the imposition of the surcharges, to paint a picture so black that they little realised at the time what harm they were doing.
Be that as it may, the truth of the matter is simply this. The latest figures confirm the judgment which some of us made a few days ago. Judged on the trade figures, the latest and the right estimate of the deficit on current account is between £350 million and £400 million a year. As the Chancellor said, quite

rightly, during the course of his speech today, the position will improve next year.
The Prime Minister said yesterday:
We are dealing with a situation where what matters is not what our trade and payments situation is, but what people overseas think it is."—[OFFICIAL REPORT, 23rd November, 1964; Vol. 702, c. 931.]
I urge Ministers to stop trying to pretend that everything was disaster when they took over.
The second thing which the Government did was to introduce an autumn Budget. I suggest that the way in which it was introduced, the method by which it was introduced and the language used at the time, particularly the personal attack made on my right hon. Friend the Member for Barnet (Mr. Maudling) exacerbated the difficulty. So the truth of the matter is that the wounds, if we have any, in Britain at the moment are certainly not mortal, but, if anything, are self-inflicted, and the responsibility lies on the Government side of the House. But perhaps I could be, as my right hon. Friend the Member for Flint, West might say, a little more parochial.
Let us examine these measures one by one. Clause 1 deals with the increase in Income Tax. What surprises me about what the Chancellor said earlier in his speech today was the assumption that people would almost cheerfully pay this Income Tax increase. We realise the purposes for which it has been increased and we sympathise with those purposes, but I suggest to him that 7 million people will be far from cheerful that the Labour Party has broken its election pledges and promises. I quote from a Labour Party advertisement in The Times putting words in the mouth of the right hon. Gentleman the Member for Huyton. [HON. MEMBERS: "The Prime Minister." Certainly, the Prime Minister. It said:
We must streamline the tax system so that those who earn money will get a better deal. We welcome people getting good rewards for their work.
This increase in Income Tax is the price which the young managers and young executives have to pay for a Labour Government.
The hon. Member for Colne Valley (Mr. Duffy) and my hon. Friend the Member for Horsham rightly talked about the effect which this would have


upon the level of savings and the effect that it might have also upon investment. Whatever the facts about those two matters, certainly it is a penalty on initiative, and we deplore it.
Clause 2, dealing with the increased tax on petrol and oil, is directly inflationary and must inevitably put up industrial costs. It is estimated that it would raise road haulage costs alone by no less than 2½ per cent. We heard something from my hon. Friend the Member for Dumfries and the hon. Member for Inverness today, quite rightly, about bus services. These discussions which the Chancellor referred to were still in an exploratory stage, he said today. Scant comfort, I suggest, to those operators who are on the knife edge of economic viability, particularly in the rural areas. What about the effect on disabled drivers of putting up the petrol tax? What is the Chancellor going to do about that? What will happen in the next Price Review for agriculture and horticulture? The effect of all this on the balance of payments is doubtful, to say the least, and hardly accords with the Labour Party election manifesto which promised new and relevant policies to deal with the persistent rise in prices.
I turn to Clauses 3 to 6—the surcharge—to which again my right hon. Friend the Member for Flint, West referred, and I hope that the Financial Secretary will be good enough to reply to the very pertinent question put to him by my hon. Friend the Member for Oswestry, that this is a totally indiscriminate surcharge. The present 15 per cent. overall rate is especially harsh on goods which were previously subject to a low rate of duty. The Chancellor was good enough to say that he would consider improvements. I appreciate that assurance was qualified and we shall seek to make them when we come to the Committee stage.
I notice that the criticism of the surcharge was not all confined to this side of the House. The hon. Member for Heywood and Royton, in a most telling speech, made some important points in this regard. It affects goods which had previously been exempted from duty under Section 6 of the 1958 Imports Duty Act. What is the sense in

that? The levy is therefore being charged on equipment which we must have for modernisation purposes. Then there are the categories of goods where the levy could have no effect whatsoever upon the level of imports—goods in transit, goods already ordered, and so on.
Then there is the category of raw materials. In the White Paper it was categorically stated, whatever the Chancellor may have said today, that the plan was to reduce imports, and raw materials were specifically excluded. The hon. Member for Wellingborough, in his excellent maiden speech, pointed out clearly that there are many other categories—plywood, essential oils, pharmaceuticals and chemicals among them—where raw materials are only too clearly included in the surcharge. This must put up costs at home and also the costs of exports. Where is the sense in that?
I hope that the Chancellor will be willing to consider exemptions we shall suggest. We were told, first, that there would be a review of the surcharge in the spring. We are now told, following the E.F.T.A. meeting—the right hon. Gentleman confirmed it today—that we are to have a review within a matter of months. Two questions need to be asked. First, if the surcharge is to be removed so soon, why, as was asked by my right hon. Friend the Member for Flint, West, need we have incurred all this odium by putting it on in the first place? The second question is that, if it was intended to hold the pass temporarily, as the Chancellor suggests, how soon are we to see the other measures which are designed to replace it?
The hon. Member for Lincoln (Mr. Taverne) rightly said that some of these measures would take some time to work out. That is true. It is a fair point to make. But what about encouragement of modernisation, the speeding up of technical advice and the making of industry more competitive? What are the Government's proposals for each and every one of these? Or do they not have any?
Whether or not the surcharge is necessary is perhaps a matter of judgment but we can certainly agree about two matters in relation to it. First, it was tactlessly done, to say the least. The Foreign Secretary is reported to have


said that it nearly broke his heart. My right hon. Friend has pointed out that the comment of The Times was that it nearly broke up E.F.T.A.—and what a tragedy that would have been. My right hon. Friend also said that the Government have broken almost every conceivable international trading agreement there is.
It really cannot be over emphasised—and I hope that the Government are learning this lesson—that it is extremely important to retain the goodwill of our customers, not throw it away in any country carelessly or recklessly, as the Government seem almost hellbent on doing. That is not the only criticism of the method of introduction of the surcharge or, indeed, of the introduction alone.
The surcharge interrupts—temporarily, as the Chancellor would no doubt say—what has always, quite correctly, been British policy under Governments of both sides in modern times—to work towards the removal of trade barriers throughout the world. How is the President of the Board of Trade to appear when he tackles the process of the Kennedy Round? Surely these measures have put the United Kingdom into an extraordinarily difficult situation.
I have said before in the House that all nations are interdependent in matters of trade. I am sure that that is profoundly true. It is also true to say that the British Government cannot act at any time in trade matters in arrogant isolation, and that requires to be remembered.
We assume that the Government thought they had done enough to deal with the temporary imbalance in our trade by introducing the Budget. We assume that they hoped that the export rebates would be some tangible encouragement to exporters although, as we now know, some foreign exporters are reducing United Kingdom invoices by as much as 2 per cent. But I think it a fair inference that the Government thought that the Budget would deal with the situation.
For example, only the day after publication of the White Paper, the Foreign Secretary was saying in the United States—on 27th October—that the Government had deliberately decided not to use the Bank Rate. Yesterday, the Prime Minister said three times—the second time in

answer to an interruption by my hon. Friend the Member for Louth (Sir C. Osborne)—that the only reason for raising Bank Rate was to deal with the situation that had arisen during the last few days, which he later defined as being the last week.
It is certainly clear that the 7 per cent. Bank Rate was not purposefully planned by the Chancellor of the Exchequer at the time of his Budget, but had become necessary by Monday. What is also clear is that if it had become necessary only in the last few days, it had nothing whatever to do with the situation which the Government found when they came to office, but with their subsequent mistakes.
It is very sad indeed that we are now discussing this enormous increase in the Bank Rate. There is an opinion that it was not necessary to put up the rate to that extent and would not have been necessary if action had been taken just a few days before. But, oh no! We were to have no stop-go or anything else! It is very sad additionally to see that the British action is now triggering a chain reaction of increases in Bank Rates in other countries, notably the United States and Canada.
It must affect mortgage costs, as my hon. Friend the Member for Holland with Boston (Sir H. Butcher) said. It must affect of the cost of borrowing by companies and individuals, not least in outlying areas in Britain. It must put up hire-purchase costs. It must increase our exports costs. As the hon. Member for Colne Valley said, it must inevitably slow down business activity at home. This is a stop and a very definite stop which, directly or indirectly will hit every family in Britain and help to put up the cost of living still further. We regret and regret deeply that it was necessary through the Labour Government's own fault to raise Bank Rate in this way.
During the debate, something has been said on the subject of uncertainty and I should like to say a few words about it. It is felt in its strongest form perhaps not so much about the Government's diagnosis of our economic problems, for we all agree with their emphasis on an incomes policy and the work which they are doing towards it and so on. The uncertainty at home and abroad is about their order of priorities. As we all know, confidence is a most curious animal


extremely hard to create and very easy to lose. There is a strong suspicion at home and abroad that the Government's priorities are wrong. I will not comment upon that in detail, except to make the point to the Chancellor of the Exchequer for future consideration.
I suggest, and I am sure that it is worth saying, that there should be a greater concentration not so much on the distribution of wealth, however important that may be, but rather on seeking means of creating new wealth by putting drive and purpose into the economy. We beg the Chancellor to learn this lesson, for it is our view that the measures in the Budget will have precisely the opposite effect. Until this is so and until it is plain to everybody that it is so, the difficulty will remain.
I congratulate the right hon. Gentleman on the fact that he was able to consult the international and other banking institutions about the Bank Rate. Why it should be possible in that instance and not about the surcharges I simply fail to understand. If the Chancellor has learned that lesson, at any rate, I hope that he will learn the other. The only disadvantage is that these lessons are learned and learned expensively at the cost of the country.
Again, on the subject of uncertainty, I know that the Chancellor endeavoured to be helpful today about the corporation tax and the capital gains tax to which my right hon. Friend the Member for Barnet referred and which was mentioned by more speakers than any other matter in the debate—by my hon. Friend the Member for Horsham, the hon. Member for Manchester, Cheetham (Mr. Harold Lever), whose speech I was sorry to miss, the hon. Member for Heywood and Royton and my hon. Friend the Member for Oswestry.
The Chancellor of the Exchequer simply must appreciate, as I hope he does, that the uncertainty being created in the investment world—and I refer not only to the City of London, but way beyond that, out to those taking investment decisions on the spot, outside portfolio matters—is very great indeed. He must publish either in the form of a White Paper or in some other form his proposals in greater detail.
We acknowledge that exact descriptions of the new tax systems may not be feasible, but we believe that the right hon. Gentleman must do two things. He must be more precise as to the framework, and he must be as specific as possible. I cannot see why he should not be able to say that the Corporation Tax will be, let us say, at the rate of 40 per cent. I cannot see why he should not be specific about the rate of the Capital Gains Tax. The fact of the matter is that vast numbers of people's interests are directly affected by the hesitation which is universally felt, through his fault, at this time, and I beg him to remove the uncertainty.
The hon. Member for Woolwich, West spoke of Sir Stafford Cripps in his remarkable speech. Certainly, all of us in the House will have the greatest respect for the late Sir Stafford Cripps. [HON. MEMBERS: "Oh."] Right hon. and hon. Members opposite most certainly have. I wonder whether they would deny that they have respect for him. He said something some years ago which no doubt the electorate will be pondering at this moment. I quote:
I cannot imagine the Labour Party coming into office without a first-rate financial crisis.
What prescience he showed. Before the election there was certainly a problem. Crisis there was not.
Certainly, the Government inherited a situation which required a degree of expert management. It is that which they have plainly failed to give the country. The fault lies not in Britain but in the present lack of leadership. The Government have proved themselves already, in 40 days, quite unable to manage the British economy, and we shall vote against this Budget as hard as we can.

9.37 p.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): I have to reply to a succession of two winding-up speeches, one orthodox by the hon. Member for Taunton (Mr. du Cann) and one distinctly unorthodox by the right hon. Member for Flint, West (Mr. Birch). I am sure that the House enjoyed both of them equally.
It is my pleasure to begin, as the hon. Member for Taunton did, by congratulating the many maiden speakers we have heard in this debate. The first


was my hon. Friend the Member for Woolwich, West (Mr. Hamling), who proved to be a somewhat belligerent maiden. Those of us who know him well, as I do, will fully understand how it is that someone who has been fighting so hard and so long in West Woolwich to get to this House should be in a somewhat belligerent mood when he came to address it. However, those of us who know him realise that there is a gentler side to his nature, and I am sure that before long the House will have an opportunity of seeing that, too.
I hope that the other maiden speakers will forgive me if I say what I have to say about them en bloc. We have heard the hon. Members for Dumfries (Mr. Monro), Fermanagh and South Tyrone (The Marquess of Hamilton), Welling-borough (Mr. Harry Howarth), Inverness (Mr. Russell Johnston) and Horsham (Mr. Hordern). I regret that I missed the speech of the hon. Member for South Angus (Mr. Bruce-Gardyne). I think that they all made more traditional maiden speeches. They spoke eloquently and persuasively about the needs and problems of their constituencies.
It is, perhaps, invidious to single out any one among so many, but I think I am expressing the feeling of the House when I say that we were all highly impressed by the speech of the hon. Member for Horsham, who spoke very relevantly about the difficulties of this country and, in particular, about our position as the holder of a reserve currency. He also emphasised, and I was glad that he did, the importance of and the need for greater savings in this country. He was also one of the speakers who raised the question of the difficulties which are being encountered as a result of our announcement, so it is said, of our intention to legislate for a corporation and capital gains tax in the spring Budget. I know, from personal conversations, that there is uncertainty and some frustration among investment advisers as a result of this announcement, but I would ask this question seriously of the House and of those people who feel that way in the City—would that uncertainty have been any less if we had said nothing? The fact is, as everyone knows, that we fought this election, among other things, on a determination to make major changes in the tax structure.
We were committed to tax reform. That was referred to in the Queen's Speech. Would there not have been far wider speculation as to what were to be the major tax reforms that we had in mind if we had said nothing at all? We have tried to give assistance by making clear at the earliest possible moment what were the two major reforms of taxes which we are intending to carry out, and carry out this year. Of course, we had the additional reason, as has been said—it was said by the hon. Member for Horsham—that as part of our whole policy of trying to help to create the atmosphere in which we could hope to make a new successful initiative towards an incomes policy, it obviously was very helpful that we should be able to make quite clear that we were proposing to fulfil at the earliest date those election pledges. Having said that, as my right hon. Friend said, we are anxious to restrict and limit as much as we can any uncertainty that there is. There obviously are severe limitations upon the amount that we can say, and properly say, in advance, about proposed tax changes. These are complicated matters. The whole scheme has to be worked out and thought out very carefully and it would be quite wrong for us to seek to commit ourselves on specific points until their implications for the rest of the scheme were fully understood.
The right hon. Gentleman the Member for Barnet told us that he would raise a number of specific questions and I was anxious to hear them, hut, in the end, what we had was a general reference to the well-known difficulties and doubts created in the minds of the investment trusts about the effect of double taxation relief and the danger of double taxation. I know, from conversations which I have already had, of the anxieties that there are on these matters and we have invited those concerned to submit memoranda to let us know in good time all the points to which they want us to give attention. As my right hon. Friend has said, without giving any commitment on the matter, we will certainly look at them and see what, if any, further guidance we are able to give.
Before coming to deal with more general questions raised in the debate, perhaps I can deal with one or two specific question that have been asked of me. The right hon. Member for


Barnet asked a number of questions—as other hon. Members have—in relation to the import charge. We were asked in particular why it was being imposed on goods in transit, why it was being imposed on essential materials which were not available here and why it was being imposed at a flat rate. He cited the contrast of Canada, who I think had three rates when they introduced such a charge. May I remind hon. Members, first, what the object of this charge is? It is to reduce imports, reduce them substantially and reduce them quickly. We hope by this means to reduce them by a rate of about £300 million a year.
Let me deal with these questions first. First of all, goods in transit. It is essential, if this charge is to operate, that it should bite and bite at once, and take effect at once. If it is made to bite at once on goods in transit then it will at once begin to have a deterrent effect on importers who are considering importing further goods.
Secondly, it is imperative for the success of this scheme that we should establish that it is non-discriminatory and that we should establish that it is non-protective. "Goods in transit" covers a wide variety of goods. There are some coming from the Far East which may be in transit for as long as two or three months. If these goods are to be exempt from the charge, it will lead to complaints of discrimination from rival exporters from countries which are nearer. If we were to exempt such goods as are in transit for two or three months, would those countries, the exporters and the importers of those goods be content, also, that when the charges were lifted or reduced the lifting or reduction of the charge should be deferred until goods in transit had arrived in this country?
It would be quite impracticable to do that. In any event it would lead to such administrative difficulties in investigating claims that particular goods were in transit at the relevant time that it would be quite impracticable to erect the administrative structure which would be required in what is, after all, a temporary scheme of this kind.
It is suggested that essential materials should be excluded, particularly those alleged to be non-available in this country. Nearly all goods which are imported

seem to the importer to be essential, otherwise he would not import them. What are to be the criteria? How are we to test what is essential? There is no objective test. Just imagine for a moment what an amount of argument and dispute would be required. How are we to set up, again for a temporary scheme like this, the administrative machinery which would be required for it?

Sir Knox Cunningham: Sir Knox Cunningham (Antrim, South) rose—

Mr. MacDermot: I am in the hands of the House, but I have a great deal to say.

Mr. Deputy-Speaker (Dr. Horace King): Order. If the hon. and learned Member does not give way, the hon. and learned Member for Antrim, South (Sir Knox Cunningham) must resume his seat.

Sir Knox Cunningham: Would the hon. and learned Gentleman say what sense it makes to impose the surcharge on a man-made fibre material which is being imported to help the manufacture of man-made fibres in Ulster when it cannot be obtained except from abroad and where not obtaining it will reduce employment? What is the sense of that?

Mr. MacDermot: One can always take a particular example in a scheme of this kind and ask how that, by itself, will help the objective. In answer to his question, I ask the hon. and learned Gentleman: supposing that we were to start making exceptions of the kind he is asking us to make, where is it to stop? In the end we should produce such an unprincipled scheme that we should immediately be accused of erecting it as a protective tariff and accused of having a discriminatory scheme.

Sir Knox Cunningham: Sir Knox Cunningham rose—

Mr. MaeDermot: I gather that the hon. and learned Member says that it is a raw material. In fact, it is not. It is a processed material. There are many industries whose products are regarded as raw materials of the next industry to purchase them, but they are not in the natural sense raw materials at all.
The right hon. Member for Barnet (Mr. Maudling) gave a not-very-fortunate


example in support of his argument—ammonium sulphate. It is not right to suggest that that is not available here. A vast quantity is manufactured in this country, and we are net exporters of ammonium sulphate.

Mr. Maudling: I said ammonium nitrate.

Mr. MacDermot: There was mention of nitrogenous fertilisers.
Again, I stress the administrative difficulties of trying to make exceptions. It would require erecting machinery which would he quite impracticable for a temporary scheme. I suggest that it is clear that there are very good reasons for the standing rule which exists in this country and in many other countries and which we are applying in this case—to apply the charges on all goods which are entered with Customs after a given date.
We were next asked, why apply it at a flat rate? This is intended to be a non-protective, non-discriminatory charge which is administratively workable as a temporary, quick-operating scheme. If we were to have discriminatory, different rates, we would be accused of introducing a discriminatory scheme and there would, again, be a mass of arguments and attempts to persuade us to put one particular product in one category or the other.
The great advantage of the flat rate scheme, as my right hon. Friend said, is that it leaves it open to buyers to decide for themselves for which goods they are prepared to pay a higher price, rather than that the Government should try arbitrarily to dictate their choice.
My hon. Friend the Member for Westhoughton (Mr. J. T. Price) raised the subject of the drawback machinery. We have made one important departure from the normal import duty procedure. That is in relation to warehousing. Existing Customs law allows goods to be placed in bonded warehouses without payment of duty, which becomes payable when the goods are removed from the warehouse. Obviously this would be inappropriate in the context of a temporary import duty of this kind and could become an instrument of widespread evasion. Clause 3(6) provides, therefore, that the goods become chargeable when entered for warehousing.
In the drawback Clauses, we have provided for remission of the charge in respect of goods which are exported in the same state or are used as a material or component in the manufacture of goods which are exported.
We were asked whether we were going to follow the existing procedure. Where goods are already subject to drawback of existing Customs duties, the charge will be dealt with under the same procedure. That, obviously, will be administratively much simpler for all concerned. But where there is not already an established procedure, the provisions of the Bill give greater flexibility to the Customs than is provided under the Import Duties Act. We hope and intend to make the procedure somewhat simpler than the existing one.
We have also made a change in relation to remission of duty which we think will be helpful. Under normal drawback and remission arrangements, where the commissioners are satisfied at the time of importation that goods are intended for re-export or export, they may remit instead of levy, and later repay it. Clause 5(7) will now enable the commissioners to make a partial remission in cases where the importer can satisfy them that a large quantity of the goods will be exported but cannot identify those which will not.
I come to the larger question which is raised, and obviously overshadowing the debate has been the announcement made yesterday of the increase by 2 per cent. in the Bank Rate. It has been noticeable that some hon. Members opposite have scarcely been able to conceal a certain pleasure at this rise in the Bank Rate. [Interruption.] If hon. Members who express surprise had been sitting where I have been sitting, they would know what I mean. It is a curious reaction from hon. Members of a party who pride themselves on their patriotism.
The reason for their glee is clear. It is that they think that this is the first time since the General Election that they are able to make out a case, however bad a case, that some distasteful action we have had to take was the result not of the inheritance they bequeathed to us but something we had done ourselves. This argument was put in several different


ways by different speakers—and sometimes in several different ways by the same speaker, as in the case of the right hon. Member for Barnet.
The first case was that it was the advent of the Labour Government that led to the pressure on sterling, and that, if the Conservatives had won the election, money would have poured back into this country. The simple answer to that one, as so many hon. Members opposite have been at great pains to point out, is that the pressure on sterling occurred only during the last 10 days or so, and did not come about immediately we had won the election. If hon. Members had been right in that argument, surely the pressure on sterling would have started immediately after the result of the election was declared.
The second way in which it is put forward is to say that we irresponsibly exaggerated the balance of payments deficit with which we were confronted, and failed to emphasise the special factors. If that were right, one would have expected the pressure on sterling to have started as soon as we announced on 26th October what the balance of payments situation was, and the emergency measures we were taking to counteract that situation.
It is a remarkable fact, but it is a fact, that there was not immediate pressure on sterling then, and it is a remarkable fact that when one compares the pressure on sterling there was both in 1957 and in 1961 the balance of payments situation was far less serious than was the one we found when we took office. It is not right to accuse us of failing to make clear the special considerations that apply. My right hon. Friend has done that from the very first day, but however much one has regard to special factors, however much it may be true that some improvement of the situation was to be looked for next year, no one has challenged the fact that still the level of our balance of payments deficit in the next year would have been at a quite unacceptable level—

Sir John Rodgers: Not £800 million.

Mr. MacDermot: Not £800 million, but no one ever suggested that it would be £800 million—[Interruption.] Hon. Members must contain themselves, and have

the patience to let me finish my sentence. No one has ever suggested that the balance of payments deficit next year would be £800 million, but it would still have been at a wholly unacceptable rate, and it is that which hon. Members opposite do not want to face up to.
The third way of putting the argument is by saying that the pressure was the result of the inflationary effects of the Budget. There can be no doubt, and hon. Members on both sides have given expression to this view today, that there has been misunderstanding abroad on this question—[HON. MEMBERS: "Why?"] I will come to the question "Why?" in a moment. Perhaps one of the useful purposes of this debate is to help dispel those illusions.
I should like to analyse a little further the attitude of the Opposition to the Budget—an attitude which, I suggest, is wholly illogical and inconsistent. Let us start with the pensions increases. Do hon. Members opposite oppose the pensions increases and the other social security benefits? We only know what we read in the newspapers, but we are even led to believe that they might be ready to help us over the Bill that will be debated tomorrow. How do hon. Members opposite think that these increased benefits should be paid for? How do they think that the public expenditure share should be financed? They evidently do not approve of our way of doing it, which is by a 6d. increase in the standard rate of Income Tax. But they do not say how they would do it. They are quite understandably reticent on that subject.
The second question I ask is, do they oppose, or do they not, the imposition of the 15 per cent. charge? I get the impression that for the most part hon. Members opposite do not oppose it. I know that some do, and the right hon. Member for Flint, West made it quite clear that he does. Do those who oppose it suggest that we should have done nothing, or what alternative action do they suggest we should have taken? Those who agree that we should do it say that we did it in the wrong way. I shall deal with that argument in a moment. What everyone is agreed about is that they do not suggest that we should have deliberately embarked on deflation or a return to stop-go, nor


should we have exercised our rights under our international agreements to impose quota restrictions.
It has been quite clear from the start, at least so far as the right hon. Member for Barnet is concerned, that he considered that not only had we inherited our problem from his Government but that we had also inherited the solutions. The remedy which he had first so proudly claimed paternity for he is now rather hinting is an illegitimate child. He was still adhering to the adoption of the child on the first occasion when this matter was debated in the House on 4th November in the debate on the Address, when he said:
As part of their short-term measures, the Government have decided, in the light of estimates n front of them, that the time has come to employ these measures to operate directly or the balance of payments. I entirely agree with them that if they feel now—and this was their judgment and responsibility, which we will not oppose in principle in any way at all—that action should be taken, then they are right to act directly on the balance of payments and not by 'stop-go' or deflation.
The right hon. Gentleman went on:
It is true that the surcharge is contrary to international obligations, whereas quotas are not. But I must say that I have never really understood the point of the argument on that score. … While we want to examine the level of the surcharge and its coverage very carefully, it is only right to state that if this type of measure has to be introduced, one would not say from the start that a quota system is right and a surcharge is wrong."—[OFFICIAL REPORT, 4th November, 1964; Vol. 701, c. 239–40.]
We know that not all hon. Members opposite shared his view. We have heard from the right hon. and learned Member for St. Marylebone (Mr. Hogg) that he thinks that immediately we came into power, four weeks ago, we ought to have imposed a 7 per cent. Bank rate, a view which I see has also been expressed by none other than Mr. Paul Chambers. I assume that those expressing that view are not suggesting that the cause of the need for a 7 per cent. Bank rate is something which was the creation of the Labour Government.

Mr. Quintin Hogg (St. Marylebone): I only suggested that it would have been rather wiser to lock the door before the horse was stolen.

Mr. MaeDermot: Whatever metaphors the right hon. and learned Gentleman chooses to express himself in, the fact

is that if the action should have been taken four weeks ago it could hardly have been the result of something which the Labour Government had done.
Thirdly, it would seem that hon. Members opposite do not oppose the export rebate scheme. We have heard very little criticism of it. There have been some suggestions that it was not at a high enough rate. Those suggestions missed the point that we are not free to raise it to any level we like, but whatever we do must be defensible as a rebate of indirect taxes. There has been some doubt, some question raised, I think by the right hon. Member for Barnet, about the effectiveness of it. But no one has really attacked it or suggested that we ought not to do it.
I hope that the House appreciates the effect of these three decisions, the social security bonus, the 15 per cent. charge and the export rebate scheme. Taken by themselves, they require some substantial increase in taxation to avoid inflation. The Opposition have opposed each tax which we have proposed without recommending any other in its place, and then they have had the effrontery to call our Budget inflationary. Just think for a moment what is the effect of the Budget.
Take, first, the measures which will come into effect at once and not those which are deferred until the spring. It is estimated that the import charge will reduce imports at the rate of between £200 million and £300 million a year in the near future. We therefore have need to divert resources from domestic use to match this improvement in the balance of payments.
The estimated revenue of the charge itself is £200 million a year, less the export rebate purchases which are £75 million and this will have a net effect of reducing the purchasing power by £125 million a year. In itself that is quite insufficient, and it was, therefore, necessary to impose additional taxes taking effect at once at a rate approaching £100 million a year which was the advice we were given and it has not been challenged.
We achieved this by the increased duty on petrol and derv which will bring in about £93 million a year. Taking together, the £125 and the £93 million will have a strong disinflationary effect—[HON. MEMBERS: "Oh."] That has not been appreciated abroad; I think that


it has not been appreciated in the City, and I do not think it is appreciated, even at this moment, by hon. Members opposite. Do hon. Members opposite still say that it is wrong to impose that degree of taxation, or do they still say it is inflationary—[HON. MEMBERS: "Yes."]—they cannot have it both ways. If they say it is inflationary, they mean that we ought to be imposing higher taxes still. Are they suggesting—

Sir C. Osborne: I am obliged to the right hon. and learned Gentleman for giving way. Will he give the House and the country this assurance? The most important factor in inflation is an incomes policy. Can the Government give an assurance that they have a real hope of getting the trade unions to agree to a wages policy which will check inflation in the next six months? Can he give an assurance that that policy will be achieved?

Lieut.-Colonel Sir Walter Bromley-Davenport: Not in the least.

Mr. MacDermot: I am sorry, but I lost the last part of the hon. Member's question.

Sir C. Osborne: I am asking a serious question. Can the right hon. and learned Gentleman give the House and the country an assurance that the Government have real hopes of getting from the trade unions an incomes policy which will check inflation?

Mr. MacDermot: I certainly have hopes of it. I believe that we have done more than any Government, in a matter of, as we were told today, 40 days, to create conditions in which such a policy could be achieved.
I think that hon. Members on both sides of the House want to achieve this. If hon. Members opposite say that there are other measures which will achieve it in a better way, I hope they will tell us what are those measures and that they will be a little more constructive in their criticism. Hon. Members opposite seem to take the view that because there is a cost inflationary element in a rise in the oil and petrol tax therefore the net effect of it cannot be disinflationary and that it is running counter to our whole budgetary policy. I should like to answer that by

quoting something said by a predecessor of mine as Financial Secretary, the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) during the Second Reading of the Finance Bill on 7th April, 1952.
The right hon. Gentleman summarised the object of that Budget in terms which may be familiar to hon. Members today. He said:
… a Budget and a Finance Bill can do three positive things to help. They can restore confidence abroad in our economy and in our resolute determination to put our house in order. Secondly, they can create conditions at home in which efficiency and effort are encouraged. and, thirdly, they can help to secure that a sufficient quantity of goods of the type for which there is a demand abroad go abroad."—[OFFICIAL REPORT, 7th April. 1952; Vol. 498, c. 2295.]
In that Budget the tax on petrol was increased by 7½

Mr. Selwyn Lloyd: Does the hon. and learned Gentleman endorse the criticisms which his right hon. Friend the Prime Minister made when I increased the petrol duty?

Mr. MacDermot: I should like to see the passage to which the right hon. and learned Gentleman is referring. Again, I would ask the rhetorical question: if hon. Members say it is wrong to put the tax on petrol and derv because of its cost inflationary clement, how do they say we should have collected that £93 million? What would they have done? Would they have imposed more Income Tax? If so, they should say so. If not—remembering that it is a tax that has to take effect quickly and, therefore, I think must have been a form of indirect taxation—what would thy have preferred?
Would they have rather had a further increase in the Tobacco Duty? If so, why do not they say so? Should there have been a further increase in the duty on beer, wines and spirits? Cannot they be a little more forthcoming, or would they have preferred a return to tighter hire-purchase restrictions? Which do they think would have been a more severe blow to the motor industry?
I turn now to the measures which will take effect in the spring of next year. The increase in expenditure as a result of the new social security benefits in all will be a total of £363 million; that is to


say, the £345 million which was announced by my right hon. Friend in his Budget, £300 million for pensions, £23 million National Assistance and £22 million for the abolition of prescription charges. In addition to that, the concessions announced by my right hon. Friend the Minister of Pensions and National Insurance on the 20th of this month will cost in total for this year about £18 million.
The receipts which will start will exceed this figure substantially. National Insurance contributions will total £274 million. The Income Tax increase will produce an additional £122 million making a total of £396 million. I remind the House that this increase in Income Tax will begin to operate at once as from the beginning of the new financial year, without the usual delay. Again, do hon. Members opposite suggest that this is inflationary in total?

Mr. Maudling: May I ask a question on that calculation? Is it not true that the increased contribution by the employers, which, on this reckoning, might be £140 million, will reduce their Income Tax assessments by the same amount?.

Mr. MacDermot: That may well be, but that is taken into account when we are assessing what the net effect of these measures in total will be. Again, is this alleged to be inflationary? The point is made—it has been made by a number of hon. Members—that there would De some offset in savings, but I suggest to the House that it is quite misguided and irresponsible to send out to the world the allegation that this is an inflationary Budget. Any proposals to raise taxes and contributions on this scale are bound to exert some inflationary pressures on the economy, but it is elementary that in looking at the Budget as a whole one must balance the disinflationary effects against the inflationary effects, and the net effect of the Budget, taking both the immediate effects and those coming into force next spring, will be that it will be disinflationary to the extent of over £250 million a year.
The right hon. Member for Barnet says that it is only disinflationary to the extent that the other measures which we have taken by themselves would have been inflationary. I respect

fully congratulate him on his at least having got the point. I think that we all agree, again perhaps with the exception of the right hon. Member for Flint, West, that the level of demand in the country taken as a whole is not excessive. It was not our object to produce deflation as a result of this Budget. When we say that people have failed to appreciate the disinflationary effect of this Budget we mean that they have only looked at those factors which, by themselves, would have had inflationary effects and have ignored the countervailing action taken to offset that.
We believe and we are advised that demand is about the right level. We have not reverted to "stop-go". We do not want, nor do we intend, to slow down the economy, but it is doing a disservice to this country to misrepresent a Budget the object of which—and the right hon. Member for Barnet at least seems to agree—is likely to be achieved. It is doing a disservice to the country to misrepresent it as being an inflationary Budget.
Then the argument is put forward, and has been put forward again today, that the next problem with which we were confronted was a result of our failure to consult our allies before introducing the 15 per cent. surcharge. This allegation was answered very clearly and fully by the Economic Secretary when he wound up an earlier debate on this subject, but I would beg hon. Members to reflect for a moment on what was involved.
If we were to succeed in getting this measure accepted we had to make it perfectly clear that, first of all, it was not a protectionist duty and, secondly, that it was not discriminatory—that it was not discriminatory as between different countries and not discriminatory as between different products. It therefore had to be a universally applied charge affecting the whole of the goods coming within the framework of the scheme.
There would have been no point at all in pretending to consult. If we were to consult it could only have been on the basis that we were going to put forward our scheme, that we would listen to objections, that we would be prepared to entertain those objections and,


if necessary, to modify our scheme and adapt it to meet the different requirements of different countries.
Let the House think what the position would have been if we had done that. Obviously, we would have had to consult all the countries of the Commonwealth with their many different interests. We would have had to consult Ireland, the E.F.T.A. countries, the E.E.C. countries and, of course, we would have had to consult the United States. We would have had to consult, presumably, the international organisations, G.A.T.T. and the I.M.F.
Was it really within the realm of practical possibilities for us to enter into consultations of that kind without at once spinning out the discussions endlessly? Where would they have led? How could we have met the objections received? We could not have begun to negotiate without having immense difficulties and protests from other countries which would have objected to concessions requested by one, and so on. This had to be introduced as a flat charge on all countries, and I think that all countries, when we have explained this to them, have accepted this and understood it.

Sir John Rodgers: Sir John Rodgers rose—

Mr. MacDermot: I am sorry, but I have given way a great deal already, and I fear that I have spoken for too long.
It would have been unrealistic for us to have pretended that we were in a position to consult these different countries, and I think that they all understand that. Of course, they objected. We knew that they would object. But we believed, and I think that we have been justified in the belief, that they would realise that we had to take quick and strong action, that this was the right action for us to take, and that any other alternative would

have been not only more harmful for us but would have been more harmful for them in the long run. It is a complete travesty of events of the past few weeks to suggest that the economic difficulties and the pressure on sterling are the result of a failure to consult.
The basic question as regards pressure on sterling is one of confidence. As my right hon. Friend the Prime Minister and all other members of the Government have said, we are determined to stand by and to maintain the strength of sterling. We have received support in this from both sides of the House, and I hope and believe that that support will continue to be forthcoming whatever situations may confront us.
The hon. Member for Taunton said, quite rightly, that the real solution for this country's future well-being depends on our wealth creation and upon our power to increase exports out of our wealth. We do not require any lessons from the hon. Gentleman on that score. The Government came into power on a programme designed to achieve those results. The electorate showed that it was in us that they had confidence to achieve them, and I believe that they will be proved right in the end.

Sir J. Rodgers: As the hon. and learned Gentleman would not give way, all I now ask him to do, without wishing to prolong the debate, is to place in the Library of the House a copy of the speech by his right hon. Friend the President of the Board of Trade, and, more important, of the speech by his right hon. Friend the Foreign Secretary, at the meeting of E.F.T.A. Ministers. The House will then appreciate why there is in Europe a lack of confidence in sterling.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 281, Noes 249.

Division No.8.]
AYES
[10.25p.m.


Abse, Leo
Galpern, Sir Myer
Mahon, Peter (Preston, S.)


Albu, Austen
Garrett, W. E.
Mahon, Simon (Bootle)


Allaun, Frank (Salford, E.)
Garrow, A.
Mallalieu, E. L.(Brigg)


Alldritt, W. H.
George, Lady Megan Lloyd
Mallalieu, J. P. W.(Huddersfield, E.)


Allen, Scholefield (Crewe)
Ginsburg, David
Manuel, Archie


Armstrong, Ernest
Gourlay, Harry
Marsh, Richard


Atkinson, Norman
Greenwood, Rt. Hn. Anthony
Mason, Roy


Bacon, Miss Alice
Gregory, Arnold
Maxwell, Robert


Bagier, Gordon A. T.
Grey, Charles
Mayhew, Christopher


Barnett, Joel
Griffiths, David (Rother Valley)
Mellish, Robert


Baxter, William
Griffiths, Rt. Hn. James (Llanelly)
Mendelson, J. J.


Beaney, Alan
Griffiths, Will (Manchester Exchange)
Mikardo, Ian


Bellenger, Rt. Hon. F. J.
Grimond, Rt. Hn. J.
Millan, Bruce


Bence, Cyril
Gunter, Rt. Hn. R. J.
Miller, Dr. M. S.


Benn, Rt. Hon. Anthony Wedgwood
Hale, Leslie
Milne, Edward (Blythe)


Bennett, J. (Glasgow, Bridgeton)
Hamilton, William (West Fife)
Molloy, William


Bessell, Peter
Hamling, William (Woolwich, W.)
Monslow, Walter


Binns, John
Hannan, William
Morris, Alfred (Wythenshawe)


Bishop, E. S.
Harper, Joseph
Morris, Charles (Openshaw)


Blackburn, F.
Harrison, Walter (Wakefield)
Morris, John (Aberavon)


Blenkinsop, Arthur
Hart, Mrs. Judith
Mulley, Rt. Hn. Frederick(SheffieldPk)


Boardman, H.
Hattersley, Ray
Murray, Albert


Boston, T. G.
Hayman, F. H.
Neal, Harold


Bowden, Rt. Hn. H. W.(Leics S. W.)
Hazell, Bert
Newens, Stan


Bowen, Roderic (Cardigan)
Heffer, Eric S.
Noel-Baker, Francis (Swindon)


Boyden, James
Herbison, Rt. Hn. Margaret
Noel-Baker, Rt. Hn. Philip(Derby, S.)


Braddock, Mrs. E. M.
Hobden, Dennis (Brighton, K'town)
Norwood, Christopher


Bradley, Tom
Holman, Percy
Ogden, Eric


Bray, Dr. Jeremy
Hooson, H. E.
Oram, Albert E.(E. Ham S.)


Broughton, Dr. A. D. D.
Horner, John
Orbach, Maurice


Brown, Rt. Hn. George (Belper)
Houghton, Rt. Hn. Douglas
Orme, Stanley


Brown, Hugh D. (Glasgow, Provan)
Howarth, Harry (Wellingborough)
Oswald, Thomas


Buchan, Norman (Renfrewshire, W.)
Howarth, Robert L. (Bolton, E.)
Owen, Will


Buchanan, Richard(Gl'sg'w, Spr'burn)
Howell, Denis (Small Heath)
Padley, Walter


Butler, Herbert (Hackney, C.)
Howie, W.
Page, Derek (King's Lynn)


Butler, Mrs Joyce (Wood Green)
Hoy, James
Palmer, Arthur


Callaghan, Rt. Hon. James
Hughes, Cledwyn (Anglesey)
Pargiter, G. A.


Carmichael, Neil
Hughes, Emrys (S. Ayrshire)
Park, Trevor (Derbyshire, S. E.)


Carter-Jones, Lewis
Hughes, Hector (Aberdeen, N.)
Pavitt, Laurence


Castle, Rt. Hn. Barbara
Hunter, Adam (Dunfermline)
Pearson, Arthur (Pontypridd)


Coleman, Donald
Hunter, A. E.(Feltham)
Pentland, Norman


Conlan, Bernard
Hynd, John (Attercliffe)
Perry, E. G.


Corbet, Mrs. Freda
Irvine, A. J. (Edge Hill)
Popplewell, Ernest


Craddock, George (Bradford, S.)
Irving, Sydney (Dartford)
Prentice, R. E.


Crawshaw, Richard
Jackson, Colin
Price, J. T. (Westhoughton)


Grossman, Rt. Hn. R. H. S.
Janner, Sir Barnett
Probert, Arthur


Cullen, Mrs. Alice
Jay, Rt. Hn. Douglas
Pursey, Cmdr. Harry


Dalyell, Tam
Jeger, Mrs. Lena(H'b'n &amp; St.P'cras, S.)
Randall, Harry


Darling, George
Jenkins, Hugh (Putney)
Redhead, Edward


Davies, G. Elfed (Rhondda, E.)
Jenkins, Rt. Hn. Roy(Stechford)
Rees, Merlyn (Leeds, S.)


Davies, Harold (Leek)
Johnson, Carol (Lewisham, S.)
Reynolds, Gerald


Davies, Ifor (Gower)
Johnson, James (K'ston-on-Hull, W.)
Rhodes, Geoffrey


Davies, S. O. (Merthyr)
Johnston, Russell (Inverness)
Richard, Ivor


Delargy, Hugh
Jones, Dan (Burnley)
Roberts, Albert (Normanton)


Dell, Edmund
Jones, Rt. Hn. Sir Elwyn (W.Ham,S.)
Robertson, John (Paisley)


Diamond, John
Jones, J. Idwal (Wrexham)
Rodgers, William (Stockton)


Dodds, Norman
Jones, T. W. (Merioneth)
Rose, Paul B.


Doig, Peter
Kelley, Richard
Ross, Rt. Hn. William


Donnelly, Desmond
Kenyon, Clifford
Rowland, Christopher


Duffy, Dr. A. E. P.
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Sheldon, Robert


Dunn, James A.(L'pool, Kirkdale)
Kerr, Dr. David (W'worth, Central)
Shinwell, Rt. Hn. E.


Dunnett, Jack (Nottingh'm, Central)
Ledger, Ron
Shore, Peter (Stepney)


Edelman, Maurice
Lee, Rt. Hn. Frederick (Newton)
Short, Rt. Hn. E.(N'c'tle-on-Tyne, C.)


Edwards, Rt. Hn. Ness(Caerphilly)
Lever, Harold (Cheetham)
Short, Mrs. Renee (W'hampton. N. E.)


Edwards, Robert (Bilston)
Lever, L. M. (Ardwick)
Silkin, John (Deptford)


English, Michael
Lewis, Arthur (West Ham, N.)
Silkin, S. C. (Camberwell, Dulwich)


Ennals, David
Lewis, Ron (Carlisle)
Silverman, Julius (Aston)


Ennals, David
Lipton, Marcus
Silverman, Sydney (Nelson)


Evans, Albert (Islington, S. W.)
Lomas, Kenneth
Skeffington, Arthur


Evans, Ioan (Birmingham, Yardley)
Loughlin, Charles
Slater, Mrs. Harriet (Stoke, N.)


Fernyhough, E.
Lubbock, Eric
Slater, Joseph (Sedgefield)


Finch, Harold
McBride, Neil
Small, William


Fitch, Alan
MacColl, James
Smith, Ellis (Stoke, S.)


Fletcher, Sir Eric (Islington, E.)
MacDermot, Niall
Snow, Julian


Fletcher, Ted (Darlington)
McGuire, Michael
Solomons, Henry


Fletcher, Raymond (Ilkeston)
McKay, Mrs. Margaret
Soskice, Rt. Hn. Sir Frank


Floud, Bernard
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Spriggs, Leslie


Foot, Sir Dingle (Ipswich)
MacKenzie, Gregor (Rutherglen)
Steele, Thomas


Foot, Michael (Ebbw Vale)
Mackie, George Y. (C'ness &amp; S'land)
Stewart, Rt. Hn. Michael


Fraser, Rt. Hn. Tom (Hamilton)
Mackie, John (Enfield, E.)
Stones, William


Freeson, Reginald
MacPherson, Malcolm
Summerskill, Dr. Shirley







Swain, Thomas
Varley, Eric G.
Williams, LI. (Abertillery)


Swingler, Stephen
Walden, Brian (All Saints)
Williams, Mrs. Shirley (Hitchin)


Symonds, J. B.
Walker, Harold (Doncaster)
Williams, w. T. (Warrington)


Taverne, Dick
Wallace, George
Willis, George (Edinburgh, E.)


Taylor, Bernard (Mansfield)
Warbey, William
Wilson, Rt. Hn. Harold (Huyton)


Thomas, George (Cardiff, W.)
Watkins, Tudor
Wilson, William (Coventry, S.)


Thomas, Iorwerth (Rhondda, W.)
Weitzman, David
Woodburn, Rt. Hn. A.


Thomson, George (Dandee, E.)
Wells, William (Walsall, N.)
Woof, Robert


Thornton, Ernest
White, Mrs. Eirene
Yates, Victor (Ladywood)


Thorpe, Jeremy
Whitlock, Charles
Zilliacus, K.


Tinn, James
Wigg, Rt. Hn. George



Tomney, Frank
Wilkins, W. A.
TELLERS FOR THE AYES:


Tuck, Raphael
Willey, Rt. Hn. Frederick
Mr. Lawson and Mr. McCann.


Urwin, T. W.
Williams, Alan (Swansea, W.)





NOES


Agnew, Commander Sir Peter
Douglas-Home, Rt. Hn. Sir Alec
Kilfedder, James A.


Alison, Michael (Barkston Ash)
Drayson, G. B.
King, Evelyn (Dorset, S.)


Allason, James(Hemel Hempstead)
du Cann, Edward
Langford-Holt, Sir John


Anstruther-Gray, Rt. Hn. Sir W.
Eden, Sir John
Lewis, Kenneth (Rutland)


Astor, John
Elliot, Capt. Walter (Carshalton)
Litchfield, Capt. John


Atkins, Humphrey
Elliott, R. W. (N 'c' tle-upon-Tyne, N.)
Lloyd, Rt. Hn. Geoffrey (Sutn 'C' dfield)


Awdry, Daniel
Emery, Peter
Lloyd, Ian (P'tsm'th, Langstone)


Baker, W. H. K.
Errington, Sir Eric
Lloyd, Rt. Hn. Selwyn (Wirral)


Balniel, Lord
Fell, Anthony
Longbottom, Charles


Barlow, Sir John
Fisher, Nigel
Longden, Gilbert


Batsford, Brian
Fletcher-Cooke, Charles (Darwen)
Loveys, Walter H.


Beamish, Col. Sir Tufton
Fletcher-Cooke, Sir John (S'pton)
Lucas, Sir Jocelyn (Portsmouth, S.)


Bell, Ronald
Forrest, George
Lucas-Tooth, Sir Hugh (Hendon, S.)


Bennett, F. M. (Torquay)
Foster, Sir John
McAdden, Sir Stephen


Bennett, Dr. Reginald (Gos &amp; Fhm)
Fraser, Rt. Hn. Hugh (Stfford &amp; Stone)
McLaren, Martin


Berry, Hn. Anthony
Gammans, Lady
Maclean, Sir Fitzroy


Biffen, John
Gardner, Edward
Macleod, Rt. Hn. Iain


Biggs-Davison, John
Giles, Rear-Admiral Morgan
McNair-Wilson, Patrick


Bingham, R. M.
Clover, Sir Douglas
Maginnis, John E.


Birch, Rt. Hon. Nigel
Glyn, Sir Richard
Maitland, Sir John


Black, Sir Cyril
Godber, Rt. Hn. J. B.
Marlowe, Anthony


Blaker, Peter
Goodhart, Philip
Marten, Neil


Box, Donald
Goodhew, Victor
Mathew, Robert


Boyd-Carpenter, Rt. Hn. J.
Gower, Raymond
Maudling, Rt. Hn. Reginald


Boyle, Rt. Hn. Sir Edward
Grant-Ferris, R. (Nantwich)
Mawby, Ray


Brewis, John
Gresham-Cooke, R.
Maxwell-Hyslop, R. J. (Tiverton)


Brinton, Sir Tatton
Grieve, Percy
Maydon, Lt.-Cmdr. S. L. C.


Bromley-Davenport, Lt.-Col. Sir Walter
Griffiths, Peter (Smethwick)
Meyer, Sir Anthony


Brooke, Rt. Hn. Henry
Gurden, Harold
Mills, Peter (Torrington)


Brown, Sir Edward (Bath)
Hall, John (Wycombe)
Mills, Stratton (Belfast, N.)


Bruce-Gardyne, J.
Hall-Davis, A. G. F. (Morecambe)
Mitchell, David


Buchanan-Smith, Alick
Hamilton, Marquess of (Fermanagh)
Monro, Hector


Buck, Antony
Harris, Frederic (Croydon, N. W.)
More, Jasper


Bullus, Wing Commander Eric
Harris, Reader (Heston)
Morgan, W. G.


Butcher, Sir Herbert
Harrison, Brian (Maldon)
Morrison, Charles (Devizes)


Butler, Rt. Hn. R. A. (Saffron Walden)
Harrison, Col. Sir Harwood (Eye)
Mott-Radclyffe, Sir Charles


Carlisle, Mark
Harvey, John (Walthamstow, E.)
Murton, Oscar


Carr, Rt. Hn. Robert
Harvie Anderson, Miss
Neave, Airey


Cary, Sir Robert
Hastings, Stephen
Nicholls, Sir Harmar


Channon, H. P. G.
Hawkins, Paul
Noble, Rt. Hn. Michael


Chataway, Christopher
Hay, John
Nugent, Rt. Hn. Sir Richard


Chichester-Clark, R.
Heald, Rt. Hn. Sir Lionel
Onslow, Cranley


Clark, Henry (Antrim, N.)
Heath, Rt. Hn. Edward
Orr, Capt. L. P. S.


Clark, William (Nottingham, S.)
Hendry, Forbes
Orr-Ewing, Sir Ian


Clarke, Brig. Terence (Portsmth, W.)
Higgins, Terence L.
Osborne, Sir Cyril (Louth)


Cole, Norman
Hiley, Joseph
page, R. Graham (Crosby)


Cooke, Robert
Hill, J. E. B. (S. Norfolk)
Pearson, Frank (Clitheroe)


Cooper, A. E.
Hirst, Geoffrey
Peel, John


Corfield, F. V.
Hobson, Rt. Hon. Sir John
Percival, Ian


Costain, A. P.
Hogg, Rt. Hn. Quintin
Peyton, John


Courtney, Cdr. Anthony
Hopkins, Alan
Pickthorn, Sir Kenneth


Craddock, Sir Beresford (Spelthorne)
Hordern, Peter
Pitt, Dame Edith


Crawley, Aidan
Hornby, Richard
Pounder, Rafton


Crosthwaite-Eyre, Col. Sir Oliver
Hornsby-Smith, Rt. Hn. Dame P.
Powell, Rt. Hn. J. Enoch


Crowder, F. P.
Howard, Hn. G. R. (St. Ives)
Price, David (Eastleigh)


Cunningham, Sir Knox
Howe, Geoffrey (Bebington)
Prior, J. M. L.


Curran, Charles
Hutchison, Michael Clark
Pym, Francis


Dalkeith, Earl of
Iremonger, T. L.
Quennell, Miss J. M.


Dance, James
Irvine, Bryant Godman (Rye)
Ramsden, Rt. Hn. James


Davies, Dr. Wyndham (Perry Barr)
Jenkin, Patrick (Woodford)
Rawlinson, Rt. Hn. Sir Peter


d'Avigdor-Goldsmid, Sir Henry
Jennings, J. C.
Redmayne, Rt. Hn. Martin


Dean, Paul
Jones, Rt. Hon. Aubrey (Hall Green)
Rees-Davies, W. R. (Isle of Thanet)


Deedes, Rt. Hn. W. F.
Jopling, Michael
Renton, Rt. Hn. David


Dlgby, Simon Wingfield
Joseph, Rt. Hn. Sir Keith
Ridsdale, Julian


Dodds-Parker, Douglas
Kerby, Capt. Henry
Robson Brown, Sir William


Donaldson, Cmdr. C. E. M.
Kerr, Sir Hamilton (Cambridge)
Rodgers, Sir John (Sevenoaks)


Doughty, Charles
Kershaw, Anthony
Roots, William







Royle, Anthony
Talbot, John E.
Walters, Denis


Russell, Sir Ronald
Taylor, Edward M.(G'gow, Cathcart)
Weatherill, Bernard


St. John-Stevas, Norman
Taylor, Frank (Moss Side)
Webster, David


Sandys, Rt. Hn. D.
Temple, John M.
Wells, John (Maidstone)


Scott-Hopkins, James
Thomas, Sir Leslie (Canterbury)
Whitelaw, William


Sharpies, Richard
Thomas, Rt. Hn. Peter (Conway)
Wills, Sir Gerald (Bridgwater)


Shepherd, William
Thompson, Sir Richard (Croydon, S.)
Wilson, Geoffrey (Truro)


Sinclair, Sir George
Thorneycroft, Rt. Hn. Peter
Wise, A. R.


Smith, Dudley (Br'ntf'd &amp; Chiswick)
Tiley, Arthur (Bradford, W.)
Wolrige-Gordon, Patrick


Spearman, Sir Alexander
Turton, Rt. Hn. R. H.
Woodhouse, Hn. Christopher


Speir, Rupert
Tweedsmuir, Lady
Woodnutt, Mark


Stainton, Keith
van Straubenzee, W. R.
Wylie, N. R.


Stanley, Hn. Richard
Vaughan-Morgan, Rt. Hn. Sir John
Yates, William (The Wrekin)


Stodart, J. A.(Edinburgh, W.)
Walder, David (High Peak)
Younger, Hn. George


Stoddart-Scott, Col. Sir Malcolm
Walker, Peter (Worcester)



Studholme, Sir Henry
Walker-Smith, Rt. Hn. Sir Derek
TELLERS FOR THE NOES:


Summers, Sir Spencer
Wall, Patrick
Mr. MacArthur and Mr. Ian Fraser.

Bill accordingly read a Second time, and committed to a Committee of the whole House.


Committee Tomorrow.

Orders of the Day — SHIPYARD, ABERDEEN. (DISPUTE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lawson.]

10.36 p.m.

Lady Tweedsmuir: The purpose of this Adjournment debate is to call attention to a three weeks' unofficial strike by welders at Hall Russell's shipyard, Aberdeen, of which I wrote in detail to the Minister of Labour. At one time, it involved 400 men. It took three weeks and, above all, it involved the livelihoods and right to work of two loyal trade union members.
Since entering the list for this Adjournment debate, the dispute has at last been settled, I am glad to say, I hope permanently. However, it raises certain serious issues, and I thought it right that the House should have the chance to consider them. Above all, as I wrote to the Minister, I hoped that the Minister would take the chance of giving the House his considered views on what action he thinks can be taken in future to resolve such disputes before they get out of hand, for this is one of many unofficial strikes up and down the country which endanger men's livelihoods, inconvenience the public and put our whole economy at risk.
To give a mere outline of the background to these issues; it will be seen that this dispute was not an unofficial strike about working or wage conditions, nor an inter-union demarcation dispute, but an unofficial strike over 1s. Three members of a boilermakers' union were charged by another member with a breach of union rules. These three members were asked to meet the district committee of their union at Dundee. All welders in Hall Russell's shipyard were asked to pay the expenses of the three members and, by a majority vote taken at a meeting outside the usual branch meeting, it was decided that each of the men should pay 1s.
Two welders refused to do so, a Mr. Gillies, who is a constituent of mine, and a Mr. Brown, who both asked me to take up their case on their behalf. These men refused to pay 1s. because they were paying their own fares to Dundee.

Mr. Brown was bringing the charge which was preferred and Mr. Gillies was to support him.
It was then decided at this unofficial meeting that the welders would refuse to work unless Mr. Brown and Mr. Gillies were dismissed, and so the management was informed. After three weeks, the management gave the two men concerned four weeks' notice.

Mr. Hector Hughes: On a point of order. The hon. Lady is attempting to reopen an industrial dispute which is now happily settled. It is quite unnecessary for her to reopen all these facts.

Mr. Deputy-Speaker (Dr. Horace King): That is not a point of order.

Lady Tweedsmuir: As I said at the start, the purpose of this debate was to raise issues which were serious in themselves. They were a fact and happened, and it was important that this House should consider them and the Minister should have an opportunity to give his considered views on what can be done in future to ensure that these disputes can be settled in time.
The management told me that a decision to give notice to the two men concerned was forced upon them, not so much because of the 400 people who were suspended, but because the existence of the company and of all it employees was at stake. Everyone will understand the very hard decision that was at stake, but there was also a great principle involved, namely, the right of two men to work and to support their families. The management took the view that the dispute was an internal domestic matter within the union, which was true. However, when the men walked out and it was clear that the work and livelihood of others would be involved, it seems to me that at that stage the matter went beyond an internal domestic dispute. Unless management takes a stand, its functions are usurped by others.
I know it is easy enough to say this when one has not the responsibility of thousands on one's shoulders, but there are times, surely, when a stand must be taken on a principle, when others are themselves prepared to stand for a principle. I am convinced that it would lead in the end to better and happier industrial


relations. As Mr. Gillies himself says in a courageous article in the local evening paper:
I took my stand over a principle. The principle at stake was whether we were going to have a dictatorship at Hall Russell's where right did not count, but where the majority was everything, even although the majority was wrong. No workman and no employer can shut his eyes to this challenge. It is Brown and I in Hall Russell's today; it might he a neighbour tomorrow.
Therefore, what did the union do to protect their own members—for Brown and Gillies were long-standing, fully paid-up members of the union, and Gillies is a member of the shop stewards' committee?
The two men's solicitors have sent me a long statement of all the various meetings between union officials and their members and Brown and Gillies. I sent the Minister a copy, and therefore the hon. Gentleman will be aware of the time it took for union officials to get under way and to do anything effective. Indeed, the length and circumstances of the strike speak for themselves. We have a newspaper which is published in the City of Aberdeen, and it claims to be the only Labour paper in Scotland. On the welders' strike, it said this:
The trade union principle at stake in the welders' strike has been the enforcement of a majority decision, but in this case it was a decision taken outside the normal branch meeting, and it is absolute tyranny to compel a decent member of the branch committee to contribute towards the fare of a branch delegation when he himself had to pay his own fare.
Then this newspaper, the Clarion, goes on to say:
It is now painfully clear that stronger and swifter action by full-time trade union officials is now called for in regard to unofficial stoppages. The withdrawing of trade union membership cards is not too stiff a penalty to pay for refusing to obey a union instruction to return to work.
This was stated by a newspaper which is a great upholder of the whole trade union principle.
I am bound to say that it could not be thought in this dispute that union officials were in any way cautious because of doubt as to their legal position. I am informed on the most experienced legal advice that this case is not comparable with Rooks v.

Barnard. In that case a threat was made by officers of a union to call out trade union members in breach of their contracts of service. In this case, unadvised, no tort was committed because there was no threat. There was merely a statement of fact to the management of Hall Russell's by officials of the Boilermakers' Society that they were unable to resolve the dispute among the welders.
As I said, happily this dispute came to an end and the welders were reinstated, although still many men in the yard refuse to speak to them. I think it only fair to quote from a letter which I received only today from their solicitors. It goes:
So far as Brown and Gillies know, there was no approach from any full-time officer of the union to Hall Russell's requesting their reinstatement. It would seem that the same people as informed the management that the workers would not work with Brown and Gillies told the managers of the men's change of decision.
It goes on:
The welders took their lead in victimising Gillies and Brown not from any of the branch officials who happened to work in Hall Russell's nor from their shop stewards but from individuals who hold no position of authority in the union.
This is a very important fact, because when we get to a state of affairs where a union, through circumstances best known to itself, is unable to try to protect its loyal trade union members, one is bound to ask where can the Ministry of Labour come in?
That was why I asked a Parliamentary Question of the Minister of Labour. I wanted to find out when it was that he first contacted the union officials in this dispute. The actual unofficial strike started on 5th October, but long before that there were rumblings of discontent, murmurings and disagreement which went right back to 5th May and which culminated in the fact that three men were charged with a breach of union rules, whereby this dispute took place. I was informed by the Minister of Labour that he first wrote to the officials of the union on 23rd October. The actual strike took place on 5th October, although in Part 2 of the Industrial Courts Act, 1919, it is clearly stated that the Minister of Labour has power to inquire into cases and the circumstances of any trade dispute, whether reported to him or not and, if he thinks


fit, to appoint a court of inquiry to inquire into the matter and report to him.
I am certainly not suggesting that this matter should have been the circumstance of a public inquiry, but I do suggest that where for any reason union officials are unable to protect their own loyal trade union members, the Minister of Labour should take the power which Parliament gave him to enter and offer his good offices at a very early stage of a dispute such as this.
That is why I asked the Minister what action he considered could be taken at an early date in these kind of disputes to prevent them from sliding into a situation beyond which it became far more difficult to extract all those concerned.
Since this dispute there has already been another, of an unofficial character, involving the shipwrights. Happily, the men have gone back to work, although the dispute is not settled. I believe that the publicity given to unfortunate unofficial stoppages by the Press, the men concerned and in the House has helped to try to get some speed into dealing with these matters. There is no doubt that there is a very real concern, not only among the public but among many trade union members as to the extent to which trade union officers are able to protect their own members.
It was just because of these genuine difficulties that we proposed that there should be a general inquiry into trade union law and practice. That was why I was more than interested to see that the Board of Trade has now decided to establish an independent committee of inquiry into the shipbuilding industry. I presume it will cover these delicate and fundamental questions because the terms of reference include
… research into how the industry can best be equipped and organised to make it competitive in world conditions, and what action can be taken by managements, trade unions and the Government to this end.
The Joint Parliamentary Secretary will know that the former Minister of Labour set up an inquiry in 1962 into industrial relations in the shipbuilding industry; and that representatives of the employers, the employees and the trade unions took part in it. For over eighteen months those discusions went on, and no agreement was reached, but I believe that in

some yards, at least, some good was achieved. It was a good try, and that is why I wish the present inquiry all success. At the same time, I believe that the public feel that there ought to be a real review of the practice and law of trade unions today. That subject has not been examined for sixty years.
In the meantime, the object of this Adjournment debate is to ask the Parliamentary Secretary what further action he believes can be taken at an earlier stage of unofficial disputes of this nature to resolve the problems before they get out of hand, because the whole House will appreciate that the fundamental question lying beneath all this is whether any group of men has a right, or should be able, to take away a free man's livelihood. That is why I trust the hon. Gentleman will be able to assure the House and the public by a considered statement of his Minister's powers, and his attitude to the serious issues that are involved.

10.53 p.m.

Mr. Hector Hughes: I am sure the House will deplore the fact that the hon. Lady—

Sir Harmar Nicholls: On a point of order, Mr. Deputy-Speaker. I wondered whether my hon. Friend the Member for Aberdeen, South (Lady Tweedsmuir) was aware that the limited amount of time left was to be shared by a back-bench Member. If not, is not the interruption against the conventions of this House? Surely the mere 11 minutes left should be given to the Minister.

Mr. Deputy-Speaker (Sir Samuel Storey): That is not a point of order.

Mr. Hughes: I was saying that the House will, I am sure, deplore the fact that the hon. Lady has used this opportunity to make an unjustifiable attack on trade unionism in general and upon Aberdeen trade unionism in particular. What has happened in this industrial dispute is really a victory for orthodox and constitutional trade unionism—

Mr. Nicholas Ridley: Will the hon. and learned Gentleman give way?

Mr. Hughes: —and for the Aberdeen Trades Council in particular. If the hon.


Member for Cirencester and Tewkesbury (Mr. Ridley) will allow me, the time is very short—[HON. MEMBERS: "Hear, hear."]—and I want to correct the misapprehension that has been created by the hon. Lady—

Lady Tweedsmuir: On a point of order, Mr. Deputy-Speaker. Is it in order for the hon. and learned Gentleman to restrict the time of the Parliamentary Secretary, who is to reply for the Government on a very important issue?.

Mr. Deputy-Speaker: I am in the hands of the House. The hon. and learned Member for Aberdeen, North (Mr. Hector Hughes) rose, while the Minister did not.

Sir Harmar Nicholls: Further to that point of order. The Parliamentary Secretary was on the point of rising when the hon. and learned Member for Aberdeen, North rose. I believe that the conventions of the House ought to be observed by the hon. and learned Member.

Mr. Deputy-Speaker: I have already said that that is not a point of order.

Mr. Hughes: In view of what fell from the hon. Lady's lips and the interrupter seeking to waste the precious half hour which is allowed for the Adjournment, I want immediately to take this opportunity of paying tribute to the solidarity of trade unionism in Aberdeen which overcame certain individualistic tendencies and overcame difficulties arising from certain disputes which have not been referred to by the hon. Lady. The dispute arose from certain complexities—

Sir Harmar Nicholls: On a point of order. I should have thought that the rights of this House laid down quite clearly that a private Member's time allocated in an Adjournment debate which calls for a Ministerial answer should be fulfilled and not frustrated in this way by another back-bencher.

Mr. Deputy-Speaker: I have already told the hon. Member that that is not a point of order. I hope that he will not further pursue the matter.

Mr. Hughes: Mr. Deputy-Speaker—

Lady Tweedsmuir: Perhaps the hon. and learned Member will give way for a moment. I am sure—

Mr. Deputy-Speaker: Order.

Mr. Hughes: The hon. Lady referred to a letter from the Minister of Labour dated 23rd November. I shall refer to the essential part of that letter. The dispute arose from two dissatisfied workers—

Lady Tweedsmuir: Will the hon. and learned Member give way?

Mr. Hughes: I have said that I will not give way.

Lady Tweedsmuir: Lady Tweedsmuir rose—

Mr. Deputy-Speaker: Order. The hon. Lady must not pursue the matter.

Mr. Hughes: The essential part of that letter from the Minister of Labour which the hon. Lady did not read is this—[Interruption.]

Mr. Deputy-Speaker: Order. Hon. Members must not continue to interrupt while sitting down.

Mr. Hughes: The essential part of the letter, which the hon. Lady—and I am astounded at her leaving it out is:
The employers eventually gave the two welders four weeks' notice to terminate their employment. Before this notice expired the national officials of the trade union concerned, with whom my officers had been in touch, succeeded in persuading their members to withdraw their objections to working with the welders. The firm then cancelled their notice..

Lady Tweedsmuir: Lady Tweedsmuir rose—

Mr. Hughes: I will not give way.
As a result of that the strike was happily settled on orthodox constitutional trade union lines by officials of the relevant trade unions in Aberdeen, by officials of Aberdeen Trades Council. In view of what has happened, I pay tribute to the solidarity of trade unionism in Aberdeen and, in particular, to the effective work done by its able and energetic secretary, Mr. James Milne.
In view of the way in which my time has been eaten into and the fact that the Minister wants time to reply, I say no more. I have put forward enough to correct the impressions created by the hon. Lady.

10.59 p.m.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Ernest Thornton): I proceed straight away to try to answer some of the points made by the hon. Lady the Member for Aberdeen,


South (Lady Tweedsmuir). There appears little doubt that the unofficial strikers acted unconstitutionally both in regard to their industrial agreements and union rules.
In regard to the criticism of the men, if they had been misguided but eventually accepted good advice, as they seem to have done now, and behave responsibly, nothing is gained by rebuking them for past mistakes. Probably the best interests of the firm, the union and the men concerned will be served by not publicly probing into the case now. If, however, it is true, as has been reported, that the two men have been sent to Coventry, this is to be deplored. The men should apply the spirit as well as the letter of the union's advice.
As to what the Department can do to prevent a similar situation arising in the future, the answer to that question must be that it is impossible to provide in advance against every possible situation that might arise in an industrial establishment. This is particularly the case when, as the noble Lady has pointed out, the circumstances are as exceptional as they are here. This does not mean to say that disputes of this kind should be lightly regarded. This was an unofficial and unconstitutional strike which disregarded the procedure of the industry and affected an employer and other work-people who had no concern with the matter at issue. It was essentially a matter of internal union discipline and, in those circumstances, union members should loyally abide by the constitution of their own union.
No Government can control the feelings of workers or the actions of individuals, but when such difficulties arise the Government urge that they should be threshed out in an orderly and responsible manner. The Government cannot impose good industrial relations, although they may give advice and help. In a free society it must depend on managements, unions and individual workers seeking to accommodate their differences in a reasonable and responsible manner.
I hope that we shall not exaggerate the incidence of these strikes. This strike is quite exceptional, and I speak from 35 years' experience as a full-time trade union officer before accepting my present post in the Government. While strikes are

usually to be deplored and should be avoided wherever possible, we have to appreciate that they will take place from time to time. Let us remember that our record as an industrial country in the incidence of days lost in strikes compares very favourably with other industrial countries in the Western world.
I am not by any means disposed to agree in its entirety with the criticism made of the union. In general, union officials and union executives deplore unofficial and unconstitutional action as much as anyone. They carry heavy responsibilities and, in this case, their efforts have brought the dispute to an end, about which I think we are all very happy. The noble Lady criticised my Department for not having acted early enough. This is not the case. The Ministry of Labour does not in any circumstances deal directly with unofficial strikers, and I warn the noble Lady and the House of the danger of the Ministry becoming involved directly with unofficial strikers.
The contacts of my Department's officers must be through the recognised and responsible officers of the trade union concerned. This applies to all kinds of disputes, but clearly it has an even greater force when the matter at issue is an internal affair within the union concerned, as was the case with this dispute. It was known from inquiries made at an early stage in the dispute that union officials were doing their best to handle the situation. There were therefore no grounds at that stage for my Ministry's officials to make a direct intervention. However, on 23rd October, as the noble Lady has indicated, my Ministry's Chief Conciliation Officer, following an approach from the firm, wrote to the General Secretary of the Boilermakers' Society asking that further efforts be made, and he subsequently maintained informal contacts until the matter was brought to a conclusion. I must make clear that, in the circumstances of this dispute, this was the most that the Department could possibly do. I endorse, and I am sure that the House will approve, the action which was taken.
We are all concerned about the rights of individuals and of minorities, and I appreciate the noble Lady's desire to seek to protect the rights and freedom of the individual or of small minorities.


But let us not forget the need to protect the rights and freedom of majorities. The right of workers collectively to withdraw their labour is a fundamental right in a really free society—I am speaking now about official strikes—and danger would lie in attempting by law to control the situation. Indeed, the strength and vitality of liberty in a nation can be measured broadly by the degree of freedom to exercise that right without a wide net of legal prohibition.
The noble Lady raised this matter, I thought, in relation to the Rookes v. Barnard case, indicating that there were—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at six minutes past Eleven o'clock.